Key facts
- Bank of Italy said the higher tax rate affects sectors with solid earnings and financial positions, but a stable framework still matters.
- The central bank said spreading the renovation tax breaks could have a significant impact on intermediaries' 2026 earnings.
- The Bank of Italy said the measure could also affect liquidity of non-financial companies.
- Intesa Sanpaolo CEO Carlo Messina told a parliamentary committee the measure amounted to a "South American approach" to debt management.
- The Treasury sees public debt peaking at 138.5% of GDP in 2027, from 138.1% in 2026, then falling to 137.9% in 2028.
The Bank of Italy said on November 12 that frequent or unexpected changes to the taxation of the country's financial system increase uncertainty and affect the investment decisions of market participants, in comments to parliament on the government's budget for next year.
Italy plans to collect €5.9 billion ($6.5 billion) from the financial sector to help fund planned tax cuts and spending increases in 2027. Central bank representatives told lawmakers that the higher tax rate affects sectors with solid earnings and financial positions, but that this does not diminish the importance of a stable and predictable regulatory framework.
The government also wants to spread over 10 years €20 billion in tax breaks linked to 2023 home renovation incentives that are currently scheduled to be used by taxpayers, and by financial and non-financial firms, in 2027 to lower their tax burden. The Bank of Italy said such a measure would help curb public debt growth in 2027 but could have a significant impact on intermediaries' 2026 earnings, and could also affect the liquidity of non-financial companies.
The Treasury sees Italy's public debt peaking at 138.5% of GDP in 2027, from 138.1% in 2026, before falling to 137.9% in 2028.
Il Foglio newspaper fueled a debate on whether the operation is equivalent to a form of debt restructuring aimed at making Italy's payments more affordable. Intesa Sanpaolo Chief Executive Carlo Messina seemed to suggest the same when he told a parliamentary committee on November 12 that the measure would amount to a "South American approach" to public debt management. Messina also said the measure could prompt the European Central Bank to ask Italian banks to lower their exposure to all government debt.