Italy Senate approves tax-cutting 2022 budget, moves on to Chamber

ROME, Dec 24 (Reuters) – Italy’s Senate on Friday passed the government’s tax-cutting 2022 budget, targeting the fiscal deficit to fall to 5.6% of national output from 9.4% this year.

The financial package now moves on to the Chamber of Deputies, where it must be approved by the end of the year.

The budget reduces income and business tax by some 7.5 billion euros ($8.5 billion) in 2022, lowering the number of income tax bands to four from five at present.

The deficit is seen narrowing thanks to strong economic growth and the end of stimulus measures adopted at the height of the coronavirus crisis to soften the hit to families and firms.

The upper house Senate passed the budget by 215 votes to 16 shortly after 3.00 a.m., with the support of all the parties in Prime Minister Mario Draghi’s broad coalition government.

Sidetracked by the COVID-19 emergency and tensions in the ruling majority, the government is rushing the budget through parliament leaving virtually no opportunity for debate, prompting numerous complaints among rank-and-file lawmakers.

Aside from the tax cuts, the budget allocates almost 4 billion euros to lower utility bills for households and companies in the face of soaring international energy prices.

The package extends generous subsidies on energy-saving home improvements and, among a raft of other disparate measures, imposes the closure of all the country’s fur farms by June 30.

With the aim of spurring tie-ups in the country’s fragmented banking sector, the bill extends current corporate merger incentives by six months to mid-2022, but also introduces a 500 million euro ceiling for beneficiaries.

The budget assumes Italy’s gross domestic product will grow by 4.7% in 2022, slowing from an official target of 6.0% this year.

Helped by cash from the European Union’s pandemic Recovery Fund, the level of GDP next year should finally return to pre-COVID levels, following the record 8.9% contraction registered in 2020 as a result of lengthy lockdowns.

However, the outlook has been clouded by a recent resurgence in COVID infections, while Rome’s ambitions to rein in its massive public debt may be threatened by a reduction of the European Central Bank’s bond-buying programmes.

Italy’s public debt, proportionally the highest in the euro zone after that of Greece, is targeted to fall next year to 149.4% of GDP from 153.5% in 2021.

Photo – A general view at the Italian Senate, Rome, Italy. EPA-EFE/FABIO FRUSTACI