Italy’s 2025 Budget: A Delicate Balance Between Tax Cuts and Deficit Reduction
Introduction
Italy’s parliament has approved the 2025 budget, marking a significant step towards reducing the country’s public deficit and honouring Prime Minister Giorgia Meloni’s pledge to cut taxes. The budget, worth around €30 billion (US$31 billion), focuses on reducing tax and social security contributions for low- and middle-income earners.
The Challenges Ahead
Rome is facing a delicate fiscal balancing act, following Brussels’ criticism over its debt, which stands at nearly €3 trillion, the second highest as a proportion of gross domestic product (GDP) in the EU. The country’s economy is also experiencing slowing growth, with the ISTAT national statistics office estimating GDP growth this year to be just 0.5%, half of what was forecast in June.
Key Measures
The budget includes several key measures, including:
- Making permanent the merging of the lower two income tax brackets, allowing individuals earning €28,000 a year to pay 23% instead of 25%.
- Expanding the number of people eligible for a reduction of social or tax charges.
- Allocating a €1,000 bonus per newborn for families earning up to €40,000 a year to boost Italy’s flagging birth rate.
- Scrapping the bonus for gas-fired boilers, under pressure from Brussels, and introducing a new bonus for buyers of energy-efficient household appliances, rising to €200 for households earning under €25,000.
Corporate Tax Cuts and Banking Sector Contributions
The budget also includes measures to boost hiring and reinvestment by companies, which will be able to benefit from a reduction in the corporate tax rate, dropping from 24% to 20%. This new measure is partly financed by Italy’s banking sector, which has agreed to contribute a total of €3.4 billion for the 2025 and 2026 budgets. The sector has agreed to postpone tax credits for these two years to provide liquidity to the Italian state, which will repay them later.
Environmental Concerns
Environmental associations have expressed concern over the lack of measures to tackle man-made climate change, but the budget does include some initiatives, such as the introduction of a bonus for buyers of energy-efficient household appliances.
Conclusion
The 2025 budget is a complex balancing act, aiming to reduce the public deficit, cut taxes, and address social and environmental concerns. While there are challenges ahead, the measures announced by the Italian government aim to provide a framework for sustainable growth and development.
Frequently Asked Questions
Q: What is the main focus of the 2025 budget?
A: The main focus is on reducing tax and social security contributions for low- and middle-income earners.
Q: How much is the budget worth?
A: The budget is worth around €30 billion (US$31 billion).
Q: What is the aim of the budget in terms of public deficit reduction?
A: The aim is to reduce the public deficit to 3.3% of GDP in 2025, down from an expected 3.8% this year.