The budget is too tight and Tajani isn’t happy with it

The resources are limited, but for Antonio Tajani the budget bill risks appearing like an insufficient measure: a glaring omission. The Deputy Prime Minister and leader of Forza Italia had expressed two wishes regarding this Budget Bill: that there should be no ‘tax on banks’ windfall profits’ because ‘it smacks of the Soviet Union’; and that there should be a cut in the personal income tax rate from 43 to 33 per cent for the income bracket between 50,000 and 60,000 euros, as FI has been calling for over the past couple of years. But looking at the tables in the Draft Budgetary Plan (DBP), the first appears to be there, whilst the second does not seem to be.

The Draft Budgetary Plan (DPB), sent yesterday to the European Commission and Parliament, sets out the scope of a budgetary manoeuvre for 2027 amounting to just under one percentage point of GDP: €23.5 billion. The details of the individual measures, as the document itself specifies, will be set out when the draft Budget Bill is presented to Parliament, as discussions are currently underway with the European Commission – on the one hand to secure some further leeway on the expenditure rule and, on the other, to obtain greater flexibility regarding the use of the safeguard clause, in particular regarding the possibility of using funds earmarked for energy not only for investment but also to reduce the cost of utility bills.

In any case, the table entries reveal the broad outline of the Budget Bill. On the expenditure side, 2.1 billion is earmarked for ‘fiscal measures’ in 2027: a meagre sum, which appears barely sufficient to renew the tax exemption on contractual pay rises (a measure much appreciated by the trade unions last year, particularly by the UIL, which ceased organising general strikes partly for this reason). It is certainly not enough to extend the flat tax for the self-employed to 100,000 euros, as called for by the Lega, nor for the IRPEF cut demanded by FI, which alone would cost nearly 3 billion. During Wednesday’s parliamentary debate, Prime Minister Giorgia Meloni, responding to a question from Luigi Marattin (Pld), said she was “more than in favour of extending the IRPEF rate to 33 per cent” beyond the current threshold of 50,000 euros, but the Draft Budgetary Plan (DPB) does not contain the funds to do so: there is simply not enough money to go round.

The largest allocation, amounting to 5 billion euros, is earmarked for ‘family policies and social spending’: these are measures aimed at ‘safeguarding households’ purchasing power, with particular attention to the most vulnerable’. Not exactly the socio-economic target group of those earning more than 50,000 euros a year. €2.4 billion is earmarked for healthcare. Meanwhile, through the use of the safeguard clause for energy and defence, €3.4 billion is allocated to businesses; €3.1 billion to infrastructure; and €4.5 billion to defence.

As regards funding, over half of the budget measures are financed by the higher deficit permitted under the national safeguard clause, which the EU does not take into account for the purposes of fiscal rules: this amounts to an additional deficit of 13 billion (0.54 percentage points of GDP). As for the other half of the funding, 3.4 billion remains undefined (‘other revenue/funding’, though it is unclear whether this will come from higher taxes or lower spending). Then there is the review of ministerial spending, worth 1.2 billion, and measures “relating to gambling” totalling 700 million. In total, less than a couple of billion. The blanket is, in fact, still too short. And Giancarlo Giorgetti has decided to pull it precisely where Tajani does not like it: by taxing the banks. The Draft Budget Law (DPB) in fact forecasts 5 billion in additional revenue from “measures affecting the financial sector” for 2027 alone, plus a further 5.7 billion over the following two years. It could be said that, excluding the deficit component, half the Budget Law will be financed by the extra levy on credit institutions.

The ABI, the banking association, has stated that it is awaiting details regarding the 5 billion in taxes demanded of the sector, as set out in the government’s Draft Budget Bill (DPB), but reiterates its opposition to any further payment, given that a semi-voluntary agreement had already been reached with the government last year for a contribution of 10.5 billion over three years.

Now the government, which clearly welcomed that agreement, wants to double the figure: a further 10.7 billion over the next three years (bringing the total to 21.2 billion over four years). But how? It is not yet clear. Various proposals are on the table. A further one-point increase in IRAP, which was already raised by two points last year for banks and insurance companies. Another measure concerning DTAs (Deferred Tax Assets), postponing the use of these tax credits to a later date. Or even an increase in IRES, which would technically amount to an extra tax on profits. The government’s intention, however, is to reach a new agreement with the sector.

After all, Tajani himself – who, within the government, is not only the champion of the middle class but also the defender of the banking sector – has already said that if this ‘odious tax on windfall profits’ is called a ‘contribution to the state’, or perhaps even a ‘solidarity contribution’, that’s fine by him. The tax is no longer ‘Soviet’ but has become liberal: the ABI will be able to go about in a miniskirt, as it won’t end up in its underwear.