By Giuseppe Fonte
ROME (Reuters) – Italy plans to limit fiscal incentives to retail buyers of its sovereign bonds by introducing a ceiling of 50,000 euros ($52,660.00), a draft showed on Thursday, following criticism that the plan would benefit the well off rather than the poor.
As reported by Reuters early this week, a draft of the 2024 budget proposed to allow income from government bonds to be fully discounted from the ISEE, a measure of wealth that determines access to welfare benefits under government means testing.
The proposal, part of Rome’s efforts to boost domestic holdings of its 2.84 trillion euro public debt, drew criticism from the opposition and academics, who said it would blunt welfare programmes’ focus on the poor.
Data from the national statistics bureau ISTAT showed that last year more than 5.6 million people, or 9.7% of Italy’s population, were in what it termed “absolute poverty” where they could not afford essential goods and services.
That was up from 9.1% in 2021, with the increase largely caused by consumer surging prices.
However, the latest draft showed taxpayers’ deductions would be capped at 50,000 euros in sovereign bonds and investment products for small savers whose repayment is guaranteed by the state.
Italy already taxes income from government bonds at a lower 12.5% rate than the 26% rate applied to other financial investments, including deposits.
The incentives come after the government last month raised its budget deficit targets for 2023-2025, alarming markets and setting it up for a possible clash with the European Commission.
The gap between Italian and German 10-year yields, an indicator of market confidence in highly indebted Italy, rose last week to 208 basis points, its widest since January, before retracing.
On Thursday it stood at around 200.
Italy’s debt, euro zone’s second-highest after Greece in relation to gross domestic product is expected to shrink only marginally in coming years to 139.6% of GDP in 2026 from 140.2% expected this year.
($1 = 0.9495 euros)
(Reporting by Giuseppe Fonte; Editing by Tomasz Janowski)
