Italian Economy Minister Giancarlo Giorgetti has announced that his country will take steps to reduce the impact of expensive home remodeling incentives on its enormous public debt.
Over the course of just four years, the incentives have cost the government more than € 200 billion. The largest, known as the ‘Superbonus’, lets homeowners deduct 110% of the price of energy-efficient construction work from their taxes. “We will submit our own amendment, taking responsibility for it,” said Giorgetti.
According to the Treasury, the cost of the incentives is expected to cause Italy’s public debt—currently the second-largest in the euro zone in terms of output and is closely watched by rating agencies—to increase to around 140% of GDP by 2026.
A homeowner may use the tax credit as payment to builders or banks or they could utilise the Superbonus, which was introduced in 2020, to deduct the cost of building work from their taxes over a period of 4–10 years. The tax credit buyers then had two options: they could either sell it again or take the money off their own taxes.
The Italian government, which with few exceptions barred the sale of tax credits resulting from construction projects in March, now intends to allow the cost of work completed since early 2023 to be written off over a ten-year period from tax obligations. “Spreading over 10 years will not be an option but an obligation,” Giorgetti stated.
The government is hoping that by this measure, Italy’s debt trend would improve or that it will stop further overshoots in the coming years. Giorgetti declared his opposition to parliamentary measures that would have loosened restrictions on the incentives.
The Superbonus is scheduled to be phased out gradually by the end of next year, but Italy’s central bank stated last month that if the constraints put in place prove insufficient, the government should abolish it. The minister retorted that the suggestion from the central bank “would have been welcome had it been made in 2021, 2022, or 2023, while it only comes in 2024”.
Giorgetti oversaw the accumulation of a sizable portion of the tax credits after the right-wing administration led by Prime Minister Giorgia Meloni assumed power in October 2022.
(With inputs from Reuters)
