(Bloomberg) -- Prime Minister Giorgia Meloni is set to get a boost to her national budget thanks to the country’s financial sector.
Italy’s tax inflows will be uplifted by €4 billion ($4.3 billion) in the next two years mostly through the postponement of tax deductions on banks, according to a government budget document obtained by Bloomberg.
Inflows will increase in 2025 and 2026 and then turn negative for the following four years as banks recover those deductions, according to a chart from the full budget document that is making its way through parliament for approval.
A spokesperson for the Finance Ministry was not immediately available for comment.
Bloomberg calculations based on the budget document show that the overall impact on banks is limited and that much of what is gained in the next few years will be recovered by lenders going forward.
Meloni’s cabinet is tapping Italian banks and insurers to help finance her €30 billion budget which includes hefty tax breaks and giveaways pledged to voters. The budget, which needs to be approved by parliament before the end of the year, was agreed to by ministers after weeks of government wrangling.
The budget calls for freezing state-guaranteed deferred tax assets on past credit losses, IFRS9 reporting and goodwill by delaying their deductibility. A full recovery of those tax credits will then start in 2027. Banks will also have a lower deductibility on previous losses in 2025, that will boost state inflows by €695 million.
The announcement crystallizes an aim of Finance Minister Giancarlo Giorgetti — a member of the League, which is a junior partner in the governing coalition — to deliver a budget reaping “sacrifices from everyone” with all parts of society helping out, as he described earlier this month in an interview with Bloomberg.
By tapping banks, Giorgetti is also revisiting a prior target for the government, which has singled them out repeatedly for gaining excessively from a high interest-rate environment.
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