The Italian government approves the 2023 budget of 35 billion euros to boost the economy

  • The budget finds more than 21 billion euros to tame energy bills
  • Additional energy company profits are taxed at 35%.
  • Includes amnesty for tax arrears, lowering the retirement age
  • Relaunching a bridge project linking Sicily with the mainland

ROME (Reuters) – Italy’s new right-wing government approved its first budget on Tuesday, a package focused on curbing sky-high energy bills and cutting taxes from next year for the working and self-employed.

Prime Minister Georgia Meloni hopes the increased spending will speed up recovery in the eurozone’s third-largest economy, which the Treasury Department predicted will contract in the current quarter and the first quarter of next year.

Meloni’s office said the budget bill was approved around half past midnight (23:30 GMT), after a three-hour cabinet meeting. It now goes to parliament, which must approve it by the end of the year.

The measures total about 35 billion euros ($35.84 billion), with Rome planning to finance about 60% of the package by increasing the budget deficit next year to 4.5% of GDP from 3.4% projected in September.

The Treasury Department said in a statement that other funding sources include an unexpected tax hike on energy companies that have benefited from higher oil and gas prices.

With the tax rate rising from 25% to 35% until July 2023 and calculated on earnings rather than revenue, the new tax follows a framework proposed by the European Commission and replaces a scheme that has drawn criticism and refusal to pay from many energy companies.

The budget tightens the terms of a “citizens’ wage” poverty alleviation scheme for the unemployed, which the right-wing coalition says discourages people from looking for work.

Next year, healthy people of working age will only be able to benefit for a maximum of eight months, before the complete abolition of citizen wages from January 1, 2024.

The budget allocates more than 21 billion euros next year to help businesses and households pay their electricity and gas bills.

To boost wage packages, it set aside around €4.2 billion to cut the “tax wedge” – the difference between the salary an employer pays and what a worker takes home – while giving the benefit to lower-income workers.

The package also introduces tax incentives aimed at encouraging open-contract employment for women under 36, fixed-term workers and people on national payroll.

The slowdown of the economy

With little inflation, Italy’s economy is expected to grow just 0.6% next year after a figure of 3.7% this year, according to the latest Treasury estimates, which are more optimistic than those of many independent forecasters.

By implementing one of Meloni’s major fiscal proposals, the budget extends a single tax rate of 15% for the self-employed to an annual income of €85,000, up from the current ceiling of €65,000.

Aiming to build a huge bridge linking Sicily to the Italian mainland, an old pet project by right of Italy, to oversee the project, Bill relaunched a dedicated state-backed company that had been liquidated.

One of the most controversial measures in the budget is an amnesty for tax arrears of up to 1,000 euros dating back to before 2016. Critics say such amnesty, common in Italy, encourages people not to pay their taxes.

The budget also conditionally lowers the retirement age next year and stipulates that Italians will be able to receive a pension from the age of 62 provided they have paid at least 41 years of contributions.

Under a rule set up just this year by Meloni’s predecessor Mario Draghi, people are granted a state pension at 64 provided they have worked for 38 years.

Taking into account the cost of living, the budget cuts value-added sales tax on some consumer staples such as baby care products and tampons to 5% from 10%.

($1 = 0.9766 euros)

Edited by Keith Ware

Our standards: Thomson Reuters Trust Principles.

Leave a Comment