Italy's cabinet on Oct. 28 approved the final financial bill for 2027 under Prime Minister Giorgia Meloni, committing to higher levies on the financial and energy sectors alongside support measures for middle-income households and the self-employed. Ministers said the package, which amounts to tax cuts and spending boosts totalling €26 billion, will be financed in part by additional contributions from banks, insurers, energy firms and the gambling industry.
The government expects the budget deficit to widen to 3.4% of gross domestic product in 2027, up from an expected 2.9% in 2026, placing the deficit above the European Union's 3% threshold. The administration characterized the measures as expansionary, designed to lower fiscal pressure on middle earners and the self-employed while increasing resources for the national health service.
Sector levies and expected revenue
Officials said financial institutions will be asked to provide more than €5 billion to help fund the package. Energy companies and the gambling sector are each earmarked to contribute €700 million. In addition to these sector contributions, the government will raise Italy's tax on financial transactions.
On corporate tax changes, the budget raises the IRES corporate tax rate for banks to 30.5% from 27.5% and lifts the IRES rate for insurers to 27% from 24news1% for insurers. The prime minister said she did not anticipate legal challenges from the firms targeted by the increases.
The deputy economy minister, Maurizio Leo, said the higher tax burden was structured so as not to affect banks' capital ratios. Additional revenue is expected from IRAP corporate tax receipts through a reduction in tax breaks, although the government did not specify which firms or sectors would see those reductions.
Use of European fiscal flexibility
Roughly half of the financing for the expansionary measures will come from the European Union's so-called National Escape Clause. The clause permits higher deficits to support increased defence spending and investments that further the energy transition and greener infrastructure. Economy Minister Giancarlo Giorgetti said the government will use this leeway to install and upgrade climate control systems in schools, universities, hospitals and sports facilities.
Tax reliefs and benefits for households and small businesses
The budget expands the 33% income tax bracket so it will apply to earners with incomes up to €55,000 per year. Under current rules noted by the government, the 33% band covers income between €28,000 and €50,000, while income above €50,000 is subject to a 43% rate. The maximum annual benefit per taxpayer arising from the changes is estimated by the government at about €500.
Self-employed workers will see their preferential tax regime extended: the 15% rate will apply on annual incomes up to €100,000, up from the present threshold of €85,000. The government highlighted the political importance of this measure for the self-employed, a key constituency supporting the ruling coalition.
The budget also makes permanent a reduction in road tax that covers more than 70% of small and medium-sized cars; previously this reduction was scheduled to last only through the end of 2027. Separately, citizens will be allowed to order custom license plates by paying a fee, a move the prime minister noted with a light comment about Italian creativity.
Unspecified areas and limits
While the plan sets out amounts and targeted contributors, certain details remain unspecified in the bill as approved by the cabinet. The government has not clarified which companies will be most affected by the reduction of IRAP tax breaks, and it did not provide a breakdown of how the additional funds from financial transaction taxes will be allocated across specific spending lines. The administration also framed the package as the last financial bill it will advance before a scheduled national election next year.