The Italian government has approved tax cuts that are aimed at lifting some of the tax burden from individuals and at encouraging businesses. The reductions are therefore intended to reduce the high tax burden and to lead to a further improvement in the economic climate. These tax breaks are to be funded by reductions in government spending or by raising revenue from other measures.

The individual income tax cuts will be targeted towards lower income groups. With effect from May 1 2014 a tax credit will be available to each employee paying individual income tax (IRPEF) and earning income below EUR24,000. This measure would have the effect of increasing monthly wages by around EUR80 and would affect around ten million taxpayers. This tax credit is to be paid for mainly out of government spending cuts.

The Italian government also intends to reduce tax on businesses as soon as the circumstances will allow this. To begin this process there will be a ten percent decrease in the regional tax on production (IRAP), reducing the rate to 3.5 percent. The rate of tax due on financial income is however to increase from 20 percent to 26 percent.