- Italy plans permanent bank, insurers' contribution to budget
- PM Meloni's right-wing coalition split on the issue
- Government expected to unveil full package on Friday
- Budget includes income tax cuts, increased defence spending
ROME, Oct 16 (Reuters) - The Italian government plans to collect more than 11 billion euros ($12.8 billion) from banks and insurance companies over 2026-2028 to help fund state finances, a draft budget sent to EU authorities for approval showed on Thursday.
The contribution will be on a permanent rather than one-off basis, and will amount to 0.19% of gross domestic product (GDP) in both 2026 and 2027 and to 0.1% in 2028, the document indicated.
No details were given about what form these measures would take.
The issue is triggering tensions between the government and financial lobbies, and divisions within Prime Minister Giorgia Meloni's rightist coalition.
Complete budget plans were expected to be unveiled after a cabinet meeting scheduled for Friday.
'STRATOSPHERIC PROFITS'
Italy's banking lobby ABI said earlier this week that lenders would agree to support the state through an extension of a measure imposed by the government last year entailing a multi-year freeze of tax credits, known as deferred tax assets (DTAs), that banks can tap to boost profits.
The DTA freeze provides short-term liquidity to the government by temporarily boosting tax revenues, something different from the permanent levy indicated by the draft budget.
Economy Minister Giancarlo Giorgetti and his League party have repeatedly said the Italian financial sector has made "stratospheric profits" over the last five years and now has to support state finances.
However, the League faces resistance from one of its coalition allies, the Forza Italia party, which reiterated on Thursday it would never back any form of forced windfall tax on the banking sector.
Italy attempted in 2023 to hit banks with a 40% tax on profits reaped from higher interest rates, but the measure sparked a major selloff in Italian banking stocks which forced the government to radically soften the plan.
INCOME TAX CUTS, DEFENCE SPENDING BOOST
The draft budget plan foresees tax cuts and other expansionary measures over 2026-2028 of around 18 billion euros per year, to be funded be extra revenues and savings found elsewhere in the state accounts.
Its flagship measure is a reduction in the main income tax, IRPEF, at a cost of roughly 8.5 billion euros through 2028. The second of the three IRPEF tax brackets will be reduced to 33% from the current 35%.
The budget also freezes a three-month increase in the retirement age, for those with physically strenuous jobs.
The document said Italy would boost its defence spending by 0.5% of GDP through 2028, in line with commitments agreed with NATO and European partners, while reducing the fiscal deficit to 2.8% of national output in 2026 from an estimated 3% this year.
($1 = 0.8587 euros)
Editing by William Maclean and Gavin Jones
Source: Reuters