Italian Prime Minister Giorgia Meloni on Friday dismissed concerns that the significant tax hikes on banks and insurance firms, laid out in the government’s 2026 budget, would destabilize the economy or spark a conflict with the financial sector. The budget targets an €11 billion ($12.84 billion) tax increase on these institutions from 2026 to 2028, primarily by raising the rate of the main corporate levy, IRAP, by two percentage points. Meloni asserted that the measure was not punitive, telling reporters, “I do not fear a backlash,” and noting the considerable profits lenders have recently amassed. This new revenue stream is crucial, as it will fund expansionary tax cuts and spending increases totaling €18.7 billion in 2026, with similar allocations planned for the following two years. The budget’s focus is on bolstering middle-income earners and promoting investments by industrial firms.
Deputy Prime Minister Matteo Salvini, a strong advocate for the increased taxation, defended the move, stating the government expects to gain approximately €4.4 billion from the financial sector next year. He downplayed the impact, suggesting, “Instead of 50 billion euros in profits, banks will only make 45 billion,” emphasizing that this is not an “expropriation.” Under the new rules, the IRAP tax rate will rise to 6.65% for banks and 7.90% for insurance companies, up from 4.65% and 5.90% respectively. Additionally, the government will tighten the rules on how financial firms use past losses to lower tax bills and compel them to amortize impaired loan provisions over a longer period. However, Rome will partially offset the impact by refunding banks about €1.5 billion in IRAP paid on dividends from foreign subsidiaries, following a recent EU ruling. The budget also targets a fiscal deficit of 2.8% of GDP for next year, down from 3% in 2025, to consolidate public finances despite slow economic growth.
Economy Minister Giancarlo Giorgetti confirmed the affordability of the measures, though he acknowledged that no one welcomes tax increases. The government also confirmed a reduction in the tax rate—from 40% to 27.5%—that banks must pay to release roughly €6.2 billion in reserves set aside under an opt-out clause from a contentious 2023 windfall tax. Critics argue this dual strategy sends mixed signals: first penalizing banks for large profits passed to shareholders, and then incentivizing them to pay out even more dividends. The budget will seek other funding sources as well, including an increase in the “flat tax” on foreign-earned income for wealthy individuals moving their tax residence to Italy, raising the cap from €200,000 to €300,000.
Italy Slaps Heavier Tax on Banks and Insurers to Fund Budget Boost
