Italian government approves 2027 budget

The Italian government, led by Prime Minister Giorgia Meloni, has approved a budget proposal of 26 billion euros for 2027, which includes tax reductions for certain households and increased public spending. The measure still requires approval from Parliament and comes ahead of the scheduled Italian legislative elections in 2027.

Funding sources for the budget

To fund the proposed measures, the government plans to collect an additional 5 billion euros from banks and insurance companies. This includes raising the corporate tax applicable to banks and insurers and increasing the taxation of financial transactions.

Tax changes and benefits

The government proposes to extend the 33 percent tax bracket up to an annual income of 55,000 euros, which currently ends at 50,000 euros. Another provision would increase the income threshold allowing self-employed workers to benefit from a flat-rate regime at 15 percent from 85,000 to 100,000 euros.

Deficit and European rules

The projected deficit of 3.4 percent in 2027 exceeds the European reference threshold of 3 percent of GDP. Rome plans to use the national derogation clause provided for in the European budget framework, which allows for additional spending under certain conditions, notably for defense and certain investments.

Economic outlook and next steps

Budget data disseminated by the Italian administration also indicate that the GDP growth forecast is 0.6 percent for 2027: an economic environment that is not very favorable for tax revenues. The Meloni government has completed the approval stage in the Council of Ministers. Parliament must now debate the text and may modify its measures before its final adoption.