Italy's Meloni to unveil budget with 30 billion euros to lift economy

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By Giuseppe Fonte

ROME (Reuters) - Italian Prime Minister Giorgia Meloni's first budget, due to be approved by her cabinet on Monday, will focus on curbing sky-high energy bills and cutting taxes for payroll workers and the self-employed, government officials said.

The cabinet will meet at 8.30 pm (1930 GMT) to discuss and approve the bill. It will then go to parliament, which must pass it by the end of the year.

Expansionary measures total more than 30 billion euros ($30.8 billion), with Rome planning to fund around 70% of the package by driving up next year's budget deficit to 4.5% of gross domestic product (GDP) from 3.4% forecast in September.

Some 3 billion euros will come from a windfall tax on profits of energy companies that have benefited from the surge in oil and gas prices, the officials said.

With a tax rate of 33% or more, the levy will follow a framework proposed by the European Commission and will replace a previous scheme which this year has triggered criticism and refusals to pay from numerous energy firms.

Further potential sources of funding are a tax on home deliveries to help shopkeepers hit by Amazon (NASDAQ:AMZN), and a cut to the nine billion euros previously earmarked in 2023 for Italy's "citizens' wage" poverty relief scheme.

SLOWING ECONOMY

Meloni will spend more than 21 billion euros next year to help firms and households pay electricity and gas bills, the officials said.

Around 5 billion euros are expected to go reducing the "tax wedge", the difference between the salary an employer pays and what a worker takes home, with the benefit going to low and middle income workers.

With inflation biting, Italy's economy is expected to slow down sharply in 2023, with a GDP increase of only 0.6% after a figure of 3.7% this year, according to the latest Treasury estimates.

Implementing one of her flagship fiscal proposals, Meloni will extend a 15% single tax rate for the self-employed to annual income of up to 85,000 euros, up from the current ceiling of 65,000 euros.

One of the most contentious measures in the budget is an amnesty on tax arrears of up to 1,000 euros stemming from before 2016. Critics say such amnesties, which are not uncommon in Italy, encourage people not to pay their taxes.

Meloni is also expected to conditionally reduce the retirement age next year, stipulating that Italians will be able to draw a pension from the age of 62 provided they have paid in at least 41 years of contributions.

Under a rule put in place for just this year by Meloni's predecessor Mario Draghi, people are granted a state pension at 64 provided they have worked for 38 years.

Other possible measures include making essential consumer staples such as pasta and bread, as well as baby-care products and female sanitary tampons temporarily exempt from sales tax.

($1 = 0.9746 euros)