Italy’s 2024 Budget to Cut Taxes and Increase Benefits
Italian Cabinet Set to Approve Tax-Cutting 2024 Budget
Italy’s deficit-hiking 2024 budget, set to be approved by the cabinet on Monday, aims to alleviate financial concerns and boost the economy. The budget will include tax cuts for workers and increased benefits for large families, according to officials. The government plans to increase next year’s budget deficit to 4.3% of the country’s gross domestic product (GDP) from the current 3.6%, with the additional borrowing primarily allocated to funding the tax cuts.
Increased Spending on Pensions, Healthcare, and Public Sector Contracts
In addition to tax cuts, the budget will allocate 7-9 billion euros for pensions, the health service, and public sector contracts. This additional spending will either be funded through alternative savings or tax hikes. The total budget package is estimated to be around 23-25 billion euros. Prime Minister Giorgia Meloni and Economy Minister Giancarlo Giorgetti will outline the main measures of the budget in a news conference.
Market Concerns and International Headwinds
Investors have been expressing concerns about Italy’s public finances, causing an increase in the premium for holding Italian government bonds. These concerns have been further exacerbated since Rome raised its budget deficit targets for the 2023-2025 period. Italy’s fiscal stance, according to Giorgetti, is justified due to the need to support economic activity in the face of international headwinds resulting from conflicts in Ukraine and the Middle East.
Tax Cuts for Middle and Low-Income Workers
The budget aims to provide relief to middle and low-income workers by extending temporary cuts to social contributions until 2024. This measure is intended to help them cope with high consumer prices. Additionally, the income tax rate for people earning up to 28,000 euros per year will be set at 23%, replacing the current regime where income tax rates range from 23% to 43%.
Addressing Italy’s Demographic Crisis
The budget also addresses Italy’s demographic crisis by allocating at least 1 billion euros for measures aimed at tackling the country’s declining birth rate. Italy has been experiencing a continuous decline in births, reaching the lowest levels since its unification in 1861. The rapidly aging population will also require additional resources to be allocated to pensions.
Implementation of International Corporate Tax Agreement
A separate decree, expected to be approved along with the budget, will implement the 2021 international agreement to introduce a minimum global corporate tax rate of at least 15%. This implementation could potentially increase tax revenues in Italy by 2 to 3 billion euros.
Encouraging Domestic Production
The Italian government is also working on fiscal measures to incentivize Italian companies to bring production back to the country from abroad. These measures aim to boost the domestic economy and create more job opportunities for Italian citizens.
The approval of Italy’s tax-cutting 2024 budget comes amidst market concerns over the country’s strained public finances. The government’s focus on tax cuts for workers and increased benefits for large families aims to stimulate the economy and address the declining birth rate. With the implementation of international tax agreements and measures to encourage domestic production, Italy is taking steps to support its economy and overcome existing challenges.
