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The tax reforms to expect in Italy’s 2024 budget

As the Italian government prepares to publish its budget plan for the coming year, income tax and other reforms are at the top of the agenda.

Published: 12 October 2023 16:53 CEST

The tax reforms to expect in Italy's 2024 budget

A tax specialist at an Italian tax assistance centre (CAF) preparing documents. Italy’s government has made tax reform a focal point of its 2024 budget. (Photo by Tiziana FABI / AFP)

Tax reforms are expected to be among the main features of Italy’s 2024 budget, set to be published on Monday, October 16th, and sent to the European Commission for review in the following days.

As well as tax reform for multinationals, the government is moving towards its long-term goal of a ‘flat tax’ for all employees with the introduction of its planned cut to the number of income tax (Irpef) bands.

The Vice Minister of Economy and Finance, Maurizio Leo, said in August the move towards a ‘flat tax’ was intended to encourage a new relationship between tax authorities and taxpayers.

“We have to be aware that our tax system penalises taxpayers,” he said, after the lower house of Parliament voted to approve the cut to the number of tax bands.

“We have to change the face of the tax system and we want to do this, without lowering the guard on the fight against tax evasion.”

Under the reforms, the number of income tax bands is set to be reduced from four to three.

The current bands are as follows:

23% for incomes up to 15,000 euros.
25% for incomes up to 28,000 euros.
35% for incomes up to 50,000 euros.
43% above 50,000 euros.

The three new bands are expected to be set at 23 percent, 33 percent and 43 percent.

The government has said it aims to reduce the number of bands further in the coming years under its plan to introduce a flat tax rate for employees – which was a cornerstone of its election campaign.

Changes to the Irpef rate will apply to all employees, and many self-employed workers (regular partita Iva holders, but not those on the flat tax rate), and pensioners.

The new tax for multinational companies, dubbed the minimum tax, is due to come in from January 1st next year in line with other European directives. It is predicted to bring in an estimated additional two to three billion in tax revenue.

The reform is expected to be fully functioning within two years.

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Flights, hotels, beaches: How the cost of travel to Italy is rising this summer

Italian consumer rights groups said last year that the summer of 2023 would be remembered as “the most expensive ever” for travel. But 2024 has already smashed that record, according to the latest price surveys.

The rising cost of air fares, ferry tickets, hotels, restaurants and beach clubs add up to mean a holiday in Italy will be 15-20 percent more expensive this summer compared to last year, according to a survey conducted by the Assoutenti consumer research centre in June.

While price rises in recent years have been attributed to Covid and rising inflation, which is no longer thought to be a factor, this year Assoutenti said high demand was pushing up prices amid the post-pandemic tourism boom.

Prices in Italy were “out of control as a consequence of the resumption of tourism, after the stop imposed by Covid, and the record number of foreign visitors recorded in the last year,” the survey’s authors wrote, calling on the government to take measures to contain price increases.

READ ALSO: ltaly set for summer tourism boom as bookings increase again

They warned that more Italian families were likely to “give up the summer holidays this year, not being able to face an expense that increases from year to year,” and that those who do travel may book shorter trips to keep costs down.

Some 6.5 million Italians say they won’t be going on holiday this summer at all, with half citing economic difficulties, according to a separate survey commissioned by price comparison website Facile.it.

Meanwhile, there had been a nine percent increase this year in applications for personal loans for travel purposes, the survey found.

Flight prices

One of the biggest factors was the cost of air fares, as both domestic and international flights to and from Italy were found to be more expensive again this year.

While the cost of flights between European countries had fallen slightly following inflation-driven price hikes in 2023, Italy was bucking the trend.

Italy’s flight costs had risen instead, according to recent analysis in Italian newspaper Corriere della Sera, with the average price of a summer flight between Italy and the rest of Europe up by seven percent and domestic flights by 21 percent.

READ ALSO: Why are flight prices higher in Italy than the rest of Europe this summer?

Industry sources suggest the price increase is again down to unprecedented demand, while consumer groups say the main culprit is a lack of competition on the Italian market.

Transport costs

There were price hikes too for those using other modes of transport, with the rising cost of fuel and motorway tolls in Italy named as another contributing factor in the Assoutenti survey.

Ferry tickets were also more expensive, it found, with the average increase this August at +6.3 percent compared to 2023.

Hotels and B&Bs

For a family of four, the Assoutenti survey found the most expensive place to stay in Italy this summer was Porto Cervo, Sardinia, where the average price of a week’s three-star accommodation in August came to 3,500 euros.

The cheapest options were found to be Bibione, outside Venice (872 euros) and Rapallo in Liguria (909).

READ ALSO: Tourist tax: How much is it increasing in Italy’s cities this year?

The cost of accommodation at coastal destinations had risen by 23 percent on average overall, a separate survey by consumer group Altroconsumo found.

Hotels in cities were found to be a less expensive option, with most Italian families heading for the beach or mountains to escape the heat.

Restaurants

Adding to the overall cost, prices also continued to rise this year at restaurants in holiday resorts and at beach clubs: Assoutenti recorded an average increase for the catering sector of +3.5 percent on 2023.

Beaches

Renting sunbeds and umbrellas at Italy’s beach clubs is seen as a necessity by many Italian families – and often by international visitors too, given the lack of free options in many areas.

This too was becoming more expensive in 2024, with the average daily rate for a slot at one of Italy’s private beach clubs up by more than five percent on last year. Prices had also risen by as much as 11 percent between 2022 and 2023.

Beachgoers can now expect to pay around €30-35 for two sun loungers and a beach umbrella for the day on average, though prices can rise as high as €90 in Salento and €120 in parts of Sardinia.

Both private and free-access beaches in Italy also increasingly require advance booking due to higher demand.

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