“No road tax on first cars”. The government heads into the elections with a Berlusconi-style idea

It was one of Silvio Berlusconi’s long-standing promises; now Giorgia Meloni is making it a reality. Even if only for a year. Yesterday’s Cabinet meeting approved the abolition of road tax for small and medium-powered cars and motorbikes: “Today, the government is scrapping one of the taxes most hated by Italians,” commented Prime Minister Meloni. The exemption, which applies to all motorbikes and over 70 per cent of passenger cars on the road (14.5 million vehicles in total), effectively kicks off the election campaign. 

The measure includes a number of provisions to reduce its cost: cars with an engine power exceeding 80 kW are excluded from the road tax exemption; each individual is entitled to only one exemption; and in the case of ownership of multiple cars, the exemption applies to the one with the lowest road tax liability. Despite these caveats, the cost of the measure is high: 2,362 million euros (approximately 2.4 billion) for a single year. According to government sources, the funding will come from savings made on the PNRR funds. Meloni spoke at a press conference of a ‘structural’ measure, a concept reiterated by Deputy Prime Minister Antonio Tajani, but immediately afterwards the Minister for the Economy, Giancarlo Giorgetti, clarified that ‘it will become structural’. This means that the government will go into the election campaign claiming to have abolished a tax, which in reality has merely been suspended and will be reinstated from 2028 onwards: it will then be up to whoever wins the election – whether it be the centre-right led by Meloni or the centre-left led by Conte or Schlein – to find new funding or allow the vehicle tax to return. In this sense, the suspension of the motor vehicle tax is literally an electoral bonus.

The measure allows the government to find a way out of the predicament regarding the fuel excise duty cut, which is due to expire today. This is a very costly measure (over 2.2 billion from 19 March to 17 September 2025), which the government first had to scale back and then extend for short periods, without, however, having a significant impact on fuel prices. Meloni explained that this discount will be gradually reduced, from 17 to 10 cents and then to 5 cents, until it disappears altogether. The alternative initially envisaged – a bonus based on ISEE – presented several operational challenges and risked being too selective. Consequently, the government decided to abolish the ‘road tax on the first car’, based on the same principle – as mentioned by Meloni – adopted by the Berlusconi government for the abolition of the ICI tax on the first home.

Compared with the cut in excise duties, the road tax exemption costs less (2.4 billion in a year versus 2.2 billion in six months) and offers certain improvements, both environmentally and fiscally. As Meloni pointed out, it made little sense to continue (and perhaps not even to begin) using resources to counter the rise in fuel prices caused by the energy crisis resulting from the war in the Middle East. From an ecological perspective, the reduction in excise duties is, in fact, an ‘environmentally harmful subsidy’ because it acts as an incentive to consumption; and from a fiscal perspective, it contains significant elements of inequity, not only because it applies to everyone but also because it benefits those who consume the most – and therefore, generally speaking, owners of more powerful cars – to a greater extent. The suspension of the road tax, at no extra cost, corrects these two distortions: on the one hand, it leaves money in the pockets of car owners without distorting the price signal (thereby marginally reducing fuel consumption and pollution); on the other, it redistributes resources more equitably, as it excludes owners of more powerful cars and does not multiply the benefit for those who own multiple vehicles.

But of course, it is not so much – or solely – economic logic that has guided this decision. On a political level, the government is already steering the messaging of the election campaign: “Whilst others talk about wealth taxes, we are scrapping a tax on property,” said Giorgia Meloni. The message is aimed at the centre-right electorate, which is showing some disappointment with the government’s tax policy, given that the consolidation of public finances has also been achieved through an increase in the tax burden, which has risen to its highest level in the last ten years (43.1 per cent). Meloni’s move is also a way of distancing herself from the pressure exerted by the ‘Campo Largo’ coalition, which in recent months has been clamouring for a more substantial cut in excise duties (a long-standing Meloni campaign staple), and of making the coalition appear as ‘the tax party’. The opposition may criticise the abolition of the motor vehicle tax as an electoral handout, leaving a budget shortfall for the next government. The government will be able to showcase the results of prudent management of public finances, particularly if, on 22 September, Istat revises the 2025 deficit down to below 3 per cent. The election campaign has only just begun.