Italy to get 4 billion euros in 2026 from banks, insurers

By Giuseppe Fonte

ROME (Reuters) -Italy plans to garner around 4 billion euros ($4.66 billion) next year from its banks and insurers through a package of measures contained in the government's 2026 budget, Economy Minister Giancarlo Giorgetti said on Wednesday.

The revenue will help fund expansionary tax cuts and spending hikes worth 18.7 billion euros in 2026 and a similar amount in each of the following two years, with the government focusing on supporting middle-income earners and investments by industrial firms.

Addressing lawmakers, Giorgetti said banks and insurers should contribute to state finances. The government's fiscal consolidation efforts had led to lower interest rates on Italy's debt and also helped financial firms to obtain better funding conditions on the market, he said.

"The banking and insurance sector in these three years has strongly benefited from the positive effects of government action," the minister said.

Italy targets Rome's budget deficit to fall to 2.8% of national output in 2026 from an estimated 3% this year.

The government will oblige banks to spread over five years provisions on loan losses which get deducted from income, while hiking by two percentage points the IRAP corporate tax weighing on domestic lenders and insurers, the budget document shows.

A measure allowing banks to unlock reserves built up last year under an escape clause from a 2023 windfall tax is expected to garner 1.65 billion euros next year.

Critics have accused the government of sending conflicting signals, first blaming the banks for huge profits passed on to shareholders, and then encouraging them to pay out even more dividends.

The overall package of measures affecting the financial sector, which also includes curbs on the way banks use interest expense to lower their tax bills, is worth more than 11 billion euros through 2028, according to the Draft Budgetary Plan sent to the European Commission for approval early this month.

A further measure limiting the application of an existing tax break to dividends collected from shareholdings of more than 10%, will apply to financial and non-financial firms, yielding almost 3 billion through 2028.

The budget also includes a large scale tax amnesty which allows people who have not honoured their tax bills up to 2023 to settle the dispute with the state revenue agency without sanctions or interest.

Rome expects this move to yield 9 billion euros through 2035.

($1 = 0.8575 euros)

(Editing by Gavin Jones)