Italy- The Italian government will introduce a levy on pornography and push through an amnesty for certain corporate tax evasion to generate extra funds in the 2006 budget to tame the deficit.

A 25 percent tax on pornographic material, ranging from films to inflatable dolls, will be added as an amendment to the budget now being reviewed by parliament, said Luigi Casero, a government economic adviser, in an interview. Some of the money will go to funding child care for low-income families, he said.

Italian Finance Minister Giulio Tremonti [pictured] is resorting to creative measures to trim the budget deficit, which is slated to exceed the European Union’s budget rules for a third year in 2005. The government has pledged to reduce the deficit to below the EU ceiling of 3 percent of gross domestic product in 2007.

The amendment includes an amnesty on certain corporate tax payments that may fetch as much as 3 billion euros ($3.6 billion) and aims to end tax disputes between companies and the government, Casero said. The government also included in the amendment rules that allow it to block takeovers of former state-owned monopolies.

The package of additional measures will be put to a vote in the lower house of parliament as early as tomorrow. The budget will become law once it’s approved by both the lower and the upper house of parliament by Dec. 30.

Under Prime Minister Silvio Berlusconi the economy has slipped into recession twice in the past two years and growth is predicted to lag that of 12 nations sharing the euro for the ninth year in 10 this year. The economy emerged from recession in the second quarter, expanding 0.7 percent, and expanded 0.3 percent in the third quarter.

The government has already pushed through 1.9 billion euros in emergency cuts this year and added 5 billion euros in budget reductions to its 2006 spending plan that weren’t in the original draft presented in September. The extra revenue from the amnesty, which detractors say condones and encourages tax evasion, brings the total in deficit-curbing measures for next year to almost 20 billion euros.