Italy Raises Windfall Tax on Energy Industry Profits to 25%

(Bloomberg) -- Italy raised its windfall tax on profits in the energy industry to 25% from 10% while approving a 14 billion-euro ($15 billion) aid package to shore up companies and consumers hit by surging costs. 

The new measures, announced Monday evening by Finance Minister Daniele Franco, don’t include additional deficits, and Rome will also extend tax breaks for energy-intensive industries. 

The Italian government has already spent more than 20 billion euros this year to shield its economy from soaring energy prices and has taken significant steps to reduce its reliance on Russian supplies, which account for about 40% of gas imports.

“Today’s measures include reforms to streamline and boost renewable investments that will allow us to speed the transition to a green economy,” Prime Minister Mario Draghi told reporters. “This will allow us to become independent from Russia’s gas.”

The announcement comes as the European Union debates an additional round of sanctions that would phase out Russian oil by the end of the year.

While Draghi has so far resisted pressure from political parties to further widen Italy’s deficit, calls to expand cost-saving measures are expected to grow louder in coming weeks, in particular if the EU quickly agrees on a new sanctions package.

The EU is also trying to maintain a united front in rejecting a Russian demand to pay for gas in rubles, a move the bloc says would violate sanctions. Russia has already cut off gas to two EU members -- Poland and Bulgaria -- that have refused to abide by the payment demand.

Draghi told reporters on Monday that Italy would abide by the EU’s rules on the matter. 

The bloc’s energy ministers met on Monday to chart a path forward. At least one country, Hungary, has said it would accede to Moscow’s demands.

©2022 Bloomberg L.P.