Italy’s Finance Minister Giancarlo Giorgetti stated that these tax cuts will be implemented amid strong economic uncertainty, with the government working to support purchasing power while maintaining fiscal responsibility.
Italy’s latest budget aims to reduce the financial burden for middle-class taxpayers, allowing Prime Minister Giorgia Meloni to fulfil her promise to voters at a cost of €9 billion ($10.5 billion) over three years.
The government will reduce the tax rate from 35% to 33% for people earning between €28,001 and €50,000, a promise made during her election campaign, according to the Italian Treasury. Since taking office in 2022, she has consistently implemented measures to soften the impact of taxation on low earners and simplify the tax system.
Italy’s Finance Minister Giancarlo Giorgetti stated that these tax cuts will be implemented amid strong economic uncertainty, with the government working to support purchasing power while maintaining fiscal responsibility.
The other two tax brackets, which are 23% for incomes up to €28,000 and 43% for salaries above €50,000, will remain the same.
The challenge Italy faces is to make these tax changes sustainable, given sluggish economic growth estimated at 0.5% and a national debt exceeding 130% of the gross domestic product. So far, Giorgetti has managed to keep the country on the path of fiscal restraint, even after announcing that Italy’s budget deficit will reach the EU’s 3% of GDP ceiling this year.
However, as government spending increases, balancing the budget becomes more complex. In addition to the promised tax cuts, Meloni has committed to meeting NATO‘s target for defence spending of 5% by 2035.
To help fund this, she is considering a contribution from banks, though she has been quick to specify that the approach will not be punitive. Her coalition partner, League party leader Matteo Salvini, has argued that banks should pay more tax to compensate for profits made from higher interest rates in the past few years.
Additional resources are expected to come from lower borrowing costs and fiscal drag, a process that has pushed many taxpayers into higher tax brackets, thereby reducing their purchasing power but increasing tax income, something Meloni hopes will counteract the tax cut reforms.
Other planned measures include increasing funding for healthcare incentives for construction and adjusting salaries to align with the rising cost of living.
After the budget announcement, Giorgetti noted that Italy‘s current position is favorable compared to the past, which he described as forcing the country to be “in the corner like a black sheep.”
He stressed that by demonstrating fiscally responsible behavior and following the path of financial sustainability, Italy has more freedom to invest in itself, and tough decisions are now paying off.
Italian officials are drafting the government’s budget. They are reportedly working with an extra €13 billion ($15.3 billion) in fiscal space, due to lower borrowing costs, according to the people familiar with the situation.
A total of €5 billion was saved this year, with a projected €8 billion for 2026, according to those who did not wish to be identified, as the calculations are confidential. They stated that, officially, in Rome, they will use these figures as they replicate a budget that will be presented to parliament by mid-October.
That’s more notable at a time when France’s government collapse and budgetary struggles have just pushed a measure of its borrowing costs higher than Italy’s for the first time in euro zone history.
Although these figures depend on economic conditions, the windfall shows how Meloni is focusing on fiscal discipline and political stability and how it is benefiting Italy’s public finances, especially notable at a time when France is facing political turmoil and rising borrowing costs, with French rates surpassing Italy’s for the first time in the euro zone’s history.
