By Giuseppe Fonte

ROME (Reuters – Friday’s deal between the Italian government and the ruling parties saw them agree to reduce income taxes by around 7.5 billion euro ($8.50billion) in the next fiscal year. This was according to an amendment to parliament’s 2022 budget.

The amendment stated that Rome would also spend around 4 billion Euros to reduce energy costs for companies and households.

Parliament must approve the budget by December 31. The 2022 deficit is to be reduced to 5.6% from 9.4% in 2019. This is due to strong economic growth, and the end to stimulus measures that were introduced during the COVID-19 pandemic.

Mario Draghi’s budget amendment shows that Mario Draghi has allocated an additional 1.8 million euros in order to reduce utility bills due to rising international energy prices. These funds are in addition to 2 billion euros already set aside.

An additional measure permits households to pay the electricity and gas bills for next year’s first four month in 10 equal installments. This reduces the effect on household finances.

These tax reductions will be implemented principally through an IRPEF reorganisation, which decreases the number tax rates from five to four and provides tax benefits for those who earn less.

23% will continue to be the tax rate for annual income above 15,000 Euros. 25 percent will go to the 27% who have reduced the 2nd band between 15,000 and 28,000 euro.

Third band with income between 28,000 and 50,000 euro will receive the largest cut to 35% instead of 38%.

For incomes between 50,000-75,000 euros, the fourth band will go up from 41% – 43%. This rate, which is already applied to income over 75,000 euros is effectively an annulling of the fifth income-tax band.

A tax reform has also excluded more than 800,000 self employed workers from having to pay a regional tax (IRAP).

($1 = 0.8825 euros)