Italy’s Council of Ministers has approved a draft state budget for 2027 together with a multiannual budget covering 2027 to 2029. The package is valued at about €26 billion for 2027 and €27 billion for 2028.
The cabinet decision is a significant stage in the annual fiscal process, but it is not the final enactment of the budget. The measure remains a bill and will need parliamentary consideration before its proposals can take effect. That distinction matters for households, employers and public bodies: the announced measures set out the government’s plan, rather than immediate changes to people’s tax bills or benefits.
Priorities set out in the draft
The package concentrates on household purchasing power, employment, family support, healthcare, business competitiveness and investment. It also places particular emphasis on the south of the country.
One of the tax changes would extend the 33 per cent income-tax bracket to annual incomes of up to €55,000. The draft also keeps a preferential five per cent substitute tax on pay increases arising from private-sector contract renewals. For younger employees, it proposes a one per cent substitute tax on increases in employment income during 2027, subject to income and amount limits.
Several proposals are aimed at employment. Contribution relief for permanent recruitment of women, young people and workers in Special Economic Zones would be extended to the end of 2027. The bill also proposes enhanced tax deductions for qualifying new hires, with higher coefficients for working mothers and for people under 36.
The tax threshold for the simplified flat-rate regime would rise from €85,000 to €100,000. The separate threshold for exemption from value added tax would remain at €85,000 while approval from the European Union is awaited. The draft would also raise the tax-free limit for fringe benefits to €2,000 for workers aged 30 or under.
Housing, family and health measures
For agreed-rent housing contracts, the proposed substitute tax rate would fall from 10 per cent to five per cent. The rate would be one per cent where the tenant is aged up to 35. The plan would also extend that tax arrangement to commercial properties.
Family measures include a strengthened and permanent payment for mothers with at least two children and annual earnings from work of no more than €40,000. A new birth fund would give children born from 2027 an individual savings position, supported by a €100 annual state contribution until adulthood. Families could add their own contributions under the proposed arrangement.
The draft would increase paid parental leave at 80 per cent from three months to four months for eligible parents. It sets out longer periods for a second and third child. Self-employed parents could receive a voucher of up to €500 a month for as many as three months to help with babysitting and early-years services.
Healthcare is another major element. The National Health Fund would receive an extra €3.4 billion, reaching €146.3 billion in 2027 under the proposal. The stated uses include hospital tariff updates, work on Alzheimer’s disease and dementias, and support linked to accident and emergency services. A separate €300 health voucher is proposed for people over 75 with an annual pension of up to €28,000, for costs not covered by the national health service.
Business investment and the next stage
The bill includes support for business investment, energy, innovation and infrastructure. Tax-credit resources for investment in the single Special Economic Zone are set at €2.4 billion for 2027 and €1.25 billion for 2028. Further provisions cover cloud computing, agriculture, fishing, tourism and public-building energy efficiency.
The stated financing relies largely on increased revenue connected with the financial, gaming and energy sectors, alongside contributions from government departments. The government’s plan therefore combines tax relief and new spending with measures intended to meet its funding needs.
The significance of the cabinet approval is that the 2027 package now has a defined draft for parliamentary scrutiny. Its eventual content, timing and practical effect will depend on the legislative process. Until that process is complete, the measures should be understood as proposals within a bill rather than settled law.
