2025 Budget Law: Key Updates and Changes Ahead

Continuing the Development for the 2025 Budget Law

The groundwork for the 2025 Budget Law is underway.
The government is required to submit the Structural Budget Plan (Psb) to Brussels by September 20, 2024, outlining long-term objectives and parameters for the year-end budget law.
The Minister of Economy intends to present this plan to the Cabinet by mid-September.
Following its submission, the European Commission will assess the plan.
This urgency motivates Giorgetti to restrict expenditures outlined in the 2025 Budget Law.

Prior to finalizing the budgetary provisions, it is essential to estimate the available resources since the projected measures necessitate approximately 25 billion euros.
Nevertheless, drafting the Structural Plan will provide valuable insight into the government’s assessments and potential interventions for the upcoming budget.

The 2025 Budget Law and Public Debt

One of the primary goals in these years will be to reduce public debt.
With its current high levels, Italian public debt represents a significant vulnerability, making it critical for the government to pursue a financial correction to decrease it.
This mission imposes constraints on the possible interventions in the 2025 Budget Law, particularly limiting deficit allowances.
However, achieving this ambitious goal could pave the way for a more optimistic future for Italy.

The context for the ongoing discussions regarding the 2025 Budget Law coincides with the presentation of the annual budgetary policy report by the Public Accounts Authority.
Italy is expected to adjust its economic forecasts by reducing GDP by at least 0.5 to 0.6 points annually, equating to roughly 10 billion euros in spending adjustments.
This anticipated correction, already reflected in the Economic and Financial Document (Def), remains a critical vulnerability since it restricts the extent of deficit interventions that can be made in the budget.
Below are the measures currently being evaluated for inclusion in the next year’s financial law.

Key Proposals and Considerations

Tax Cut for Wages

The confirmation of the tax cut for wages is one of the few certainties regarding the upcoming Budget Law.
Of the estimated 18 billion euros, 10.8 billion will be allocated to renew this measure.
Nonetheless, the Budget Office warns about the ongoing relief for income thresholds of 25,000 and 35,000 euros, which creates distortions for individuals earning over 35,000 euros annually, potentially resulting in a loss of approximately 1,100 euros annually.

Middle-Class Tax Reductions

A widely supported measure is the tax reduction for the middle class, aiming to lower the personal income tax (Irpef) rate from 35% to 33% for incomes between 28,000 and 50,000 euros, while also expanding the threshold to 60,000 euros.
This initiative requires funding that is currently unavailable, which will need to be secured through a two-year preventive agreement, with results expected after October 31.

Motherhood Bonus

The government has consistently emphasized its commitment to incentivizing birth rates to counter Italy’s demographic decline.
The motherhood bonus, introduced last year, provides a total contribution exemption (up to 3,000 euros per year) for employed mothers with at least three children, extending to mothers of two children for the year 2024.
With adequate funding, there is an intention to prolong this measure and extend benefits to self-employed women.

Pensions

The end-of-year budget typically includes a chapter on pensions—an always sensitive topic due to the prioritization of unalterable expenses like public employee contract renewals.
Currently, discussions revolve around renewing the quota 103, “Women Option” and “Social Ape” with additional restrictions and potentially extending the waiting period for ordinary early retirement.
These remain hypothetical as negotiations are in their early stages.

Extra Pay Tax Exemption

To enhance employees’ salaries, another proposal considers taxing overtime with a flat tax of 15%, similar to measures for medical professionals.
This flatter tax would apply solely to wages exceeding standard work hours, potentially increasing take-home pay, albeit its implementation hinges on various financial factors.

Fringe Benefits Adjustment

The 2025 Budget Law may feature a revision of fringe benefits—compensation components provided to employees in goods and services.
The majority is contemplating establishing a unified tax-exemption cap between 1,500 and 2,000 euros for these benefits.
The previous budget provided exemptions of 1,000 euros for most workers and 2,000 euros for those with dependents.

Further insights will clarify the direction these budgetary discussions take as Government efforts continue amidst evolving economic circumstances.