(Bloomberg) -- Italy plans to raise taxes on the companies that benefitted most from the economic turbulence of recent years in order to help bring down the country’s budget deficit, Finance Minister Giancarlo Giorgetti said.
Giorgetti said that he is looking at levies that would apply to companies in a number of industries, without offering any further detail. Italy’s benchmark stock index fell as much as 1.5%.
The 57-year-old finance chief faces a delicate balancing act in trying to persuade Italian executives to accept his plans without provoking a public backlash. Last year, proposals for an extra tax on banks were effectively abandoned after they triggered a major selloff in Italian stocks, and Giorgetti promised there would be not a repeat of that mistake.
The new plan outlined by Giorgetti could be a divisive issue for the parties in Prime Minister Giorgia Meloni’s coalition government, particularly the pro-business Forza Italia party.
“We will be approving a budget that will require sacrifices from everyone,” the minister said in an interview that was pre-recorded for Bloomberg’s Future of Finance event in Milan on Thursday.
“It means taxing profits made and revenue earned, and it is an effort that the whole country must undertake which means individuals, but also small, medium and large companies,” Giorgetti said.
Italy is aiming to bring its budget deficit below 3% of economic output in 2026 from a planned shortfall of 3.8% this year. That’s necessary to keep the country in line with the European Union’s newly reinstated fiscal rules and to reassure markets after the country was reprimanded by the EU and put into a special monitoring regime.
The minister also emphasized Italy’s commitment to maintaining stable public finances and confirmed that the government sees the economy growing 1% this year.
“I believe credibility is fundamental, and this government has to give a message of credibility,” Giorgetti said. “We do what we promise, and I believe facts are what prove this.”
Still, Giorgetti has been struggling to find the revenue he needs to deliver on budget targets for next year. He needs to find around €25 billion ($28 billion) of savings and has so far managed to find only about half of that, Bloomberg has previously reported.
Speaking at the Bloomberg forum directly following Giorgetti, Intesa Sanpaolo SpA Chief Executive Officer Carlo Messina said there are ways companies can help Italy fix its finances without creating a negative bottom-line impact.
Adding to the difficulties for her Finance Minister, Meloni has pledged to cut taxes on wages next year and maintain subsidies for lower income families.
The premier has repeatedly said that it’s not only up to the government to aid poorer households, saying that those companies that profited from high interest-rates — generally understood to mean banks — should make a bigger contribution to public finances.
Other countries in Europe face similar challenges. French President Emmanuel Macron has also endorsed a temporary tax on the country’s largest companies, supporting his new government’s strategy even as it departs from his longstanding pro-business stance.
But Giorgetti insisted that Italian lenders won’t be singled out in his new plan. The defense industry has also seen its profits jump, Giorgetti noted, adding that any measures will be consistent with the government’s powers under Italy’s constitution.
“There will be a general call for everyone to contribute, not just banks,” the minister said. “It will be reasoned and rational.”
--With assistance from Donato Paolo Mancini, Flavia Rotondi, Antonio Vanuzzo, Sonia Sirletti and Tommaso Ebhardt.
(Updates with Intesa SanPaolo CEO in 12th paragraph.)
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