Italy’s Budget Under Scrutiny: Tax Cuts Favor the Wealthy, Watchdog Warns
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Italy’s proposed budget is facing mounting criticism from self-reliant economic bodies and opposition parties, raising questions about its fairness and potential impact on the nation’s finances. Concerns center on a planned tax cut that disproportionately benefits higher earners, a controversial debt-scrapping scheme, and potential incentives for tax evasion in the short-term rental market. Economy Minister Giorgetti defended the measures, emphasizing the need for fiscal obligation while acknowledging the criticisms leveled by various oversight institutions.
During recent hearings before the Senate and Chamber Budget Committees, the centerpiece of the budget – a reduction in the tax rate from 35% to 33% for income between 28,000 and 50,000 euros – came under intense scrutiny. The debate revolves around how effectively the benefits of this tax cut are distributed. Bankitalia reported that families experienced a loss of purchasing power between 2019 and 2023, recovering just 3 percentage points.
Bankitalia also expressed reservations about the proposed debt-scrapping scheme, warning that “tax evasion damages growth and produces inequity.” The subsidized settlement, thay estimate, could result in a revenue loss of 1.5 billion euros by 2026. the central bank also cautioned against unexpected changes to bank taxation, emphasizing the current solidity of the credit sector.
Court of Auditors Raises Red Flags
The Court of Auditors delivered a especially critical assessment, targeting the Irpef tax cut, the debt-scrapping plan, and the taxation of short-term rentals. The court certified that the Irpef reduction is primarily designed for those earning over 28,000 euros, with the most significant effects felt by taxpayers earning between 50,000 and 200,000 euros.
This criticism fuels an ongoing tension between the accounting magistrates and the government, sparked by the removal of Pnrr (National Recovery and Resilience Plan) works from the Court of Auditors’ oversight and further escalated by the Court’s recent challenge to the government’s plan for a bridge connecting Sicily and Calabria.
Mauro Orefice of the Court of Auditors highlighted a dual risk associated with the debt-scrapping scheme: it could “reduce tax compliance” and potentially turn the Treasury into a “financier of delinquent taxpayers.” Furthermore, the Court warned that increasing the flat-rate tax on short-term rentals could incentivize tax evasion. The Parliamentary Budget Office (PBO) concurred, finding that the debt-scrapping scheme undermines tax compliance and that the Irpef intervention primarily benefits those with incomes exceeding 48,000 euros – an average benefit of 408 euros for managers versus 23 euros for workers.
Giorgetti Defends Budget Measures
Faced with this barrage of criticism, Minister Giorgetti defended the budget, emphasizing the need to maintain control over public accounts. “I have great respect for the subjects heard before me. You must also look at what we have done not only this year, but in these 3 years: a balanced intervention taking into account all the measures,” he stated.
Regarding the Irpef cut, Giorgetti argued that it “protects taxpayers with average incomes” and extends benefits to 32% of taxpayers, with an average annual benefit of 218 euros, rising to 440 euros. He assured that the debt-scrapping scheme “won’t lead to revenue loss, naturally it is distributed differently,” framing it as a lifeline for companies struggling to repay debts. Concerning short-term rentals, he asserted that adjustments to the flat-rate tax would not harm homeowners.
Opposition Criticisms Mount
The government’s defense has failed to quell criticism from opposition parties. Elly Schlein, the secretary of the Democratic Party, labeled the budget an “austerity maneuver,” lamenting a lack of vision for long-term economic progress, industrial policy, and targeted incentives. She called for a major EU investment plan of 800 billion euros, jointly funded by public and private sectors, during a meeting with Emanuele Orsini, the president of Confindustria.
november 7,2025
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