MNI: Italy Aims To Fill 6-8Bln Fiscal Gap By Next Week-Sources
MNI (ROME) - The Italian government is still looking for ways to close a EUR6-8 billion financing gap before it presents its 2025 Draft Budget Plan to the European Commission by Oct 15, but should be ready to provide details following a likely council of ministers meeting next Monday, sources close to the governing coalition told MNI.
Finance Minister Giancarlo Giorgetti needs to boost revenues and cap expenditures to keep Italy on target for a fiscal deficit of no more than 3.3% of GDP next year, while honouring promises for no new levies and for tax cuts despite downward data revisions which have thrown 2024’s targets of 1% growth and a 3.8% of GDP deficit into question.
A temporary windfall tax already announced on large companies which have enjoyed extraordinary profits in recent years, including in the banking and defence sectors, should raise a few billion euros, a source said. (See MNI POLICY: EU Likely To Ease Debt Reduction Rules)
Specifics of the levy remain undisclosed as the government tries to avoid the negative market reaction to its August 2023 announcement of a tax on banks, which had to be diluted in response. Junior coalition members the League and Forza Italia have criticised the windfall tax, but a parliamentary source dismissed this as political “tactics” which never endangered the stability of the coalition with Prime Minister Giorgia Meloni’s Brothers of Italy.
Meloni has pledged to preserve reductions to payroll taxes and to remove an additional income tax threshold in a move towards a flat tax system. Both measures are projected to cost just over EUR15 billion. (See MNI: Italy Faces Struggle To Maintain Tax Cuts - Sources)
SPENDING REVIEW
The government plans to make further modest cuts to welfare spending, such as the successor to the universal income scheme introduced by the previous Five-Star-Movement-led government, and will cap spending increases for other programmes to reduce their overall share of the budget, sources said.
However a spending review requested by Giorgetti has so far yielded disappointing results, making it more likely he will impose the EUR400 million in cuts he had hoped to save from the measure without the agreement of the ministries affected, they added.
Other measures include a likely update of land registry records, long requested by the European Commission, which could identify previously untaxed properties, and an increase in valuations for tax purposes of properties that benefitted from Super-Bonus subsidies for home improvements. Giorgetti is also planning to reduce access to some tax credits and is considering another tax amnesty which he hopes would raise additional revenues
The finance minister has received some assistance from an upwards revision to the estimate of 2021 GDP and from a boost to revenues associated with a growing workforce.