Budget law, Italy fears Europe
A Budget Law that will not exceed 23 billion euros, of which two thirds represent a deficit, with the sole priority objective of supporting incomes that have been eroded by rising prices. The proposal provides for the confirmation of tax breaks for salaries up to 35,000 euros, the merger of the first two rates of personal income tax (Irpef) at 23%, an allocation of three billion euros for the renewal of public contracts and two billion euros for the healthcare sector. Currently, Giancarlo Giorgetti is communicating to all ministers that there is no room for further spending. The Council of Ministers is scheduled for Monday morning, and anxiety is growing within the political majority. Forza Italia is pushing to avoid further reductions in higher pension adjustments and increases in inheritance taxes, according to reports The print.
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There are tensions within the League and Fratelli d’Italia regarding the possibility of eliminating tax breaks for higher incomes and there are those who would like to further extend the benefits for those who have started the process to obtain the superbonus at 110 %. In short, until the last moment, the composition of revenues and reductions could contain some surprises. The reason for this is that this is the most delicate political step, which investors and rating agencies will observe with great attention. The first check will take place next week, on October 20, when Standard and Poor’s upgrade Italy’s credit rating. To avoid disproportionate reactions in the media, Giorgia Meloni and the Treasury Minister are taking all possible precautions. In particular, the decontribution and the reduction of Irpef will be financed only for 2024.
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There may be minor changes to women’s retirement rules, which have limited cost, but could be included in a related provision. Giorgetti, in agreement with Meloni, categorically rejected all requests for amnesty or postponement for unpaid taxes. At most, if there is space, Parliament will be able to make changes to the tax deadlines. Currently, the technicians are drafting the Budget Plan to be sent to the European Commission on Monday, and in this document, the main data supporting the maneuver must be clear. Spending reductions could reach three billion euros and will have to be credible.
The Budget will include a new global tax on web multinationals, while tax breaks and inheritance tax remain under discussion. Regarding the former, the de facto Minister of Finance, Maurizio Leo, has publicly declared that the possibility of reviewing the so-called fiscal expenditure has been put aside, but a high-level government source says that it will be necessary to make cuts to ensure the balance of balance. The cuts will mainly concern incomes above 120,000 euros, with the possibility of a more significant cut than the current one. The same applies to inheritance tax, with limited measures that will only involve third degree heirs, but which will have a strong symbolic value and will demonstrate the commitment to cover a third of the budget that will not be financed with the deficit. On many other issues, the government is taking its time, and this is demonstrated by the fact that it will probably be another ten days from now sending the draft with the main data to Brussels and presenting the budget in Parliament.
If the situation worsens, the government has a backup plan ready. Giorgetti stated concisely in recent days: “We hope not to have to review the maneuver”. The first unknown concerns the rating agencies. The League minister hopes that investors understand that the main objective is to support incomes and domestic demand, with the aim of encouraging growth, which is the only antidote to the growing debt. The second unknown concerns the ongoing conflicts in Ukraine and the Middle East. During the last meeting with the majority, Meloni showed concern about the increase in oil and gas prices in international markets, which could have negative impacts on inflation. However, the risks do not only arise from economic uncertainties in the markets, but also from hypotheses of Russian actions behind events such as the recent gas pipeline failure between Finland and Lithuania, with the fear of new events that could influence prices in international energy markets.
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