Italy targets 5 billion euros from financial sector to fund 2027 budget
Key Facts
Italy plans to raise an additional contribution of about 5 billion euros from the financial sector to support its 2027 budget, Reuters reported, as part of funding tax cuts and spending increases. The institutions subject to the contribution include banks and insurers, while the mechanism for collecting the funds has yet to be decided. The tax cuts and spending increases the government intends to include in the next budget total 23.5 billion euros. The measures amount to 0.98% of gross domestic product, according to figures reported by Reuters. The government is earmarking the additional financial contribution to help fund these measures in the next budget.
The request for additional funding from the financial sector extends beyond the next budget, with the plan targeting total proceeds of about 10.7 billion euros over 2027–2029, according to Reuters. The agency described the planned contribution as "recurring", placing it within a multiyear funding framework. The contribution planned for 2027 amounts to about 0.21% of gross domestic product, according to details of the plan reported by the agency. The target falls to 0.13% of gross domestic product the following year, 2028. It then declines to 0.1% in 2029, with contributions from the sector continuing that year.
Economy Minister Giancarlo Giorgetti justified higher taxes on banks by citing economic rents in the sector, according to remarks reported by Reuters. The minister also pointed to weak competition among banks as a reason for seeking an additional financial contribution from them. Giorgetti believes banks' large profits benefited primarily from the European Central Bank's interest rate increases. He also attributed part of the banks' gains to state loan guarantees, alongside the impact of European monetary policy on their profits. The minister summed up his argument about conditions in the sector by citing "economic rents and weak competition" to explain the move towards higher taxes on banks.
The request for the new contribution surprised the banking sector, according to banking sources cited by ANSA. The sources said the request came "without any negotiation or prior notice", describing how the contribution was presented to the institutions concerned. The sector previously faced a surprise government announcement of a tax on bank profits in August 2023. On 8 August 2023, Italy's banking share index fell 7.3% during trading following the announcement, according to Reuters. That decline was a reaction to the tax announced at the time, in an episode preceding the current contribution plan.
The new plan comes on top of an existing package aimed at raising an additional 12 billion euros from banks and insurers through 2028, according to Reuters. The government previously sought a banking contribution in the 2025 budget to help fund state finances. At the time, the government estimated proceeds from the banks' contribution at about 3.6 billion euros over 2025–2027, according to the agency. The previous package's measures included deferring tax deductions that banks would have benefited from, as part of the collection arrangements set out in that budget. It also included other small tax measures, alongside the deferral of deductions, to raise the targeted proceeds from banks.
In the debate over the scope of the upcoming plan, Deputy Prime Minister Antonio Tajani said: "I think Cassa Depositi e Prestiti and other institutions should also participate," according to Reuters. How the contribution burden will be distributed among banks, insurers and other financial institutions has yet to be determined, according to an ANSA report. Tajani called for the contribution to be collected through advance tax payments instead of new taxes on the sector. Forza Italia, for its part, ruled out a measure targeting windfall profits, according to ANSA, as debate over the collection mechanism continued. Reuters expected the full budget to be unveiled between the week following publication of its report and early November.