Italy Greenlights 2025 Budget Featuring Tax Cuts and Incentives

Rome (Eurotoday) – Italy’s 2025 budget approves tax cuts, incentives for families, and deficit reduction to 3.3% of GDP.

The Italian parliament approved the 2025 budget, aiming to meet European Union demands to cut the deficit while fulfilling Prime Minister Giorgia Meloni’s pledge to lower taxes. AFP reported that around half of the package, worth some 30 billion euros, is committed to cuts in tax and social security benefits for low- and middle-income workers.

The measures supported include driving permanent a merging of the lower two income tax brackets, so people making 28,000 euros a year can spend 23 per cent instead of 25.

And the budget raises the number of people qualified for a decline in social or tax charges.

It also includes boosting Italy’s lagging birth rate, and the budget issues a 1,000-euro bonus per newborn for families making up to 40,000 euros a year. Moreover, buyers of energy-efficient household apparatuses will be eligible for a gratuity of up to 100 euros increasing to 200 euros for households making under 25,000 euros.

Businesses that increase hiring and reinvest a portion of their profits will be capable of benefiting from a drop in the corporate tax rate, which falls from 24 per cent to 20 per cent. This new standard is partly funded by Italy’s banking sector, which has been requested to assist a total of 3.4 billion euros for the 2025 and 2026 budgets. They have consented to postpone tax credits for these two years to deliver liquidity to the Italian state, which should compensate them later.

Italy under increased scrutiny for its public debt levels

In June 2024, the European Commission recommended that Italy be included in an Excessive Deficit Procedure (EDP) due to high excess deficit levels. Italy’s 2023 deficit stands at 7.4% of GDP, well over the EU’s set benchmark of 3%. For its part, the Commission said that, on prevailing policies, Italy’s deficit will be kept at pretty high levels at 4.4% in 2024 and 4.7% in 2025.

Italy’s government has agreed to reduce public debt to 3.3% of GDP by 2025 from 3.8% of 2024, under Prime Minister Giorgia Meloni, with a hard-right coalition. This decision came immediately after the European Union fired all its questions towards the Italian record public debt coming at nearly €3 trillion—the second biggest in the EU compared with its GDP.