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Italy’s government wants to raise billions of euros from companies as it rushes to plug a €9bn gap in its budget, with the country’s banks set to contribute the most.
People involved in the talks said the discussions between lenders and officials were focused on temporarily removing deductions for banks’ so-called deferred tax assets (DTAs) and increasing the tax on bankers’ stock options.
DTAs give banks the right to pay less tax in the financial year in which the cost that generated them becomes deductible. Under the plans, banks would have to entirely postpone such deductions for 2025 and 2026. The deductions would only be partial for 2027 and 2028.
The measures under discussion would roughly contribute an extra €3bn to state coffers, the people said.
Other unspecified measures targeting other listed companies are also under discussion.
The Treasury is keeping its cards close to its chest, but finance minister Giancarlo Giorgetti will formalise the proposals to his cabinet colleagues at a meeting on Tuesday night in Rome. The meeting had initially been scheduled to finalise the fiscal plans Italy must submit to Brussels.
The agenda was formally amended on Monday night as Prime Minister Giorgia Meloni’s government attempts to accelerate plans to finalise next year’s complex budget law, which must be analysed by parliament before its final approval.
Italy has one of the highest levels of public debt, relative to its GDP, in the Eurozone. But it has reduced its budget deficit to 3.4 per cent in 2024 and is targeting a further decline to below 3 per cent, the EU-imposed target, by 2026.
Tensions have simmered within the government over the past few weeks as its members have hurried to find sufficient funds to keep both its costly pledge to cut taxes for lower-paid workers and meet EU demands. The demands from Brussels include a €10bn deficit cut next year. Discussions within the government have also focused on spending cuts for government ministries and other public services.
Forza Italia, the government’s liberal junior coalition partners, has strongly opposed new levies on banks and companies, while also pushing for cuts to income tax for those earning up to €50,000, a measure experts say would cost up to €4bn.
Members of the nationalist League party have argued that banks should bear the largest brunt, after reaping large profits thanks to the rise in Eurozone interest rates. Banks’ net interest income was boosted by the increase in borrowing costs, which were not fully passed on to savers.
The government alarmed financial markets last year when it announced a surprise windfall tax on banks, which it was later forced to retract. Giorgetti said this month that the government was in discussions with the country’s lenders and that “everyone’s contribution” was needed, though not in the form of a windfall tax.
The Treasury and the Italian banking association, ABI, declined to comment on the ongoing talks. ABI said last month that it was discussing with the government ways to contribute to the country’s budget but “measures must be temporary, pre-determined, not retroactive and with no impact on banks’ balance sheets”.
While some voters may not be pleased with the final outcome if it leads to smaller tax cuts on wages and less spending on services, the government so far has succeeded in reining in investors’ concerns. The spread between Italian and German government bonds — a key measure of risk sentiment — touched a three-month low this week.