Italy govt approves 2023 budget with 35 bln euros to lift economy

  • Budget gets more than 21 billion euros to tame energy bills
  • Tax on extra profits of energy companies at 35%
  • Includes amnesty on tax arrears, cut in retirement age
  • Relaunch the bridge project connecting Sicily with the mainland

ROME, Nov 22 (Reuters) – Italy’s new right-wing government signed its first budget on Tuesday, a package focused on curbing high energy bills and tax cuts next year for payroll workers and the self-employed.

Prime Minister Giorgia Meloni hopes the increase in spending will accelerate a recovery in the euro zone’s third-largest economy, which the Treasury has predicted will contract in the current quarter and the first quarter of next year.

The budget bill was approved at around midnight (23:30 GMT), Meloni’s office said, after a three-hour cabinet meeting. It now goes to parliament, which must pass it at the end of the year.

The measures total nearly 35 billion euros ($35.84 billion), with Rome planning to finance around 60% of the package by raising next year’s budget deficit to 4.5% of gross domestic product (GDP) from 3.4% expected in months the september

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Other funding sources include an increase in a sales tax on energy companies that have benefited from surges in oil and gas prices, the Treasury said in a statement.

With a tax rate rising from 25% to 35% until July 2023 and calculated on profits rather than income, the new levy follows a framework proposed by the European Commission and replaces a scheme that sparked criticism and refusal to pay from many energy companies.

The budget tightens the conditions of the “citizen’s wage” poverty relief scheme for the unemployed, which the right-wing coalition says discourages people from looking for work.

Next year, people of working age will only be able to draw the benefit for a maximum of eight months, before the full abolition of the citizen’s salary from January 1, 2024.

The budget provides more than 21 billion euros next year to help companies and households pay electricity and gas bills.

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To boost the pay gap, he set aside some 4.2 billion euros to cut the “tax wedge” – the difference between what an employer pays and what a worker takes home – and benefits go to low-income workers.

The package also introduces fiscal incentives aimed at encouraging open contract hiring of women under 36, fixed-term workers and national wage earners.

THE ECONOMY SLOWS

With inflation biting, Italy’s economy will grow just 0.6% next year after a figure of 3.7% this year, according to the latest Treasury estimates, which are more optimistic than those of many independent forecasters.

Applying one of Meloni’s flagship fiscal proposals, the budget extends a single tax rate of 15% for the self-employed to annual incomes of up to 85,000 euros, compared to the current ceiling of 65,000 euros.

In order to build a large bridge connecting Sicily and the Italian mainland, a long-standing pet project of Italian law, to oversee the project, the bill relaunches a dedicated state-backed company that was put into liquidation.

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One of the most controversial measures in the budget is an amnesty on tax arrears of up to 1,000 euros from before 2016. Critics say such amnesties, which are not uncommon in Italy, encourage people not to pay their taxes.

The budget is also conditional on lowering the retirement age next year, which stipulates that Italians will be able to draw a pension from the age of 62 since they have paid in at least 41 years of contributions.

According to a rule put in place just for this year by Meloni’s predecessor Mario Draghi, people are granted a state pension at 64 if they have worked for 38 years.

With an eye on the cost of living, the budget cuts the VAT sales tax on some essential consumer essentials such as baby care products and female sanitary pads to 5% from 10%.

($1 = 0.9766 euros)

Edited by Keith Weir

Our Standards: The Thomson Reuters Trust Principles.

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