ROME (Reuters) – The Italian government is preparing to raise its budget deficit target, set in April at 4.5% of gross domestic product (GDP), due to the impact of costly tax incentives for housing renovations , two sources familiar with the matter told Reuters on Monday.
At the start of the year, a decision by the European Union’s statistics agency, Eurostat, on the way in which tax credits should be classified in State accounts forced Italy to review the increases its deficits from 2020 and 2022.
The government has already taken steps to reduce tax incentives so as not to jeopardize public finances this year, despite the contribution they have made to the construction sector and the economy in general during the COVID-19 pandemic. .
However, these programs continue to weigh on Italy’s budget as billions of euros in pending credits will meet Eurostat’s criteria and be added to this year’s budget deficit, said the sources, who asked not be named due to the sensitivity of the issue.
The impact on the 2024 budget is yet to be assessed and the government could take further steps to avoid further deviations from targets, the sources added.
One of the schemes, the “Superbonus”, which offers generous incentives for the energy renovation of housing, has totaled almost 100 billion euros since its introduction in 2020.
“Thinking about the Superbonus makes me sick because it has a negative effect on public accounts, swallows up economic policy and leaves no room for other interventions,” Economy Minister Giancarlo Giorgetti said on Sunday.
He described the Superbonus as a feast where everyone helped themselves and the state had to foot the bill.
Italy had already hinted in July that it was considering changing these tax incentives as part of discussions with European Union authorities.
The government will update a series of economic projections by September 27 through the Treasury’s Economics and Finances (DEF) document.
As Italy prepares a tough budget for 2024 amid an increasingly bleak economic outlook, Giancarlo Giorgetti reiterated his commitment to keeping the deficit and debt on a downward trend, leaving little room for maneuver for stimulus measures.
(Report Giuseppe Fonte, Corentin Chapron, edited by Blandine Hénault)
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