Court of Auditors: 2025 deficit higher than expected due to the Superbonus. Income tax: 82% paid by employees and pensioners

‘In this initial phase of implementing the new European legislation on economic governance, and in line with the provisions of recent parliamentary policy documents, the monitoring exercise accompanying the 2026 Public Finance Document makes it possible to verify, at the close of 2025, that the deficit-to-to GDP stands at 3.1 per cent and the debt-to-GDP ratio at 137.1 per cent – levels which are 0.1 percentage points (0.03 percentage points of GDP when rounded to two decimal places) and 0.9 percentage points, respectively; however, they are more favourable for the deficit (-0.2 percentage points) and significantly closer to the target for debt (0.5 percentage points) when compared with the forecasts in the 2025 Public Finance Document’. This was stated by Mauro Orefice, Chair of the Joint Sections of the Court of Auditors’ Audit Committee, during the approval proceedings on the General State Accounts, highlighting that ‘as regards the deficit, the difference is explained by the largely unexpected emergence of new building-related claims legitimised by the previous legislation on the Superbonus’.

On the tax front, the Court of Auditors’ report on the General State Accounts emphasises that ‘the tax reform process launched by the enabling act has so far resulted in 18 legislative decrees and 6 consolidated texts; with the authorisation extended to 29 August 2026, the process is still ongoing and certain aspects remain to be defined in relation, amongst other things, to the comprehensive review of tax expenditures, estimated to represent a total revenue shortfall of approximately 119 billion (5.3 per cent of GDP), the failure to achieve horizontal equity in personal income tax (IRPEF), with the tax continuing to fall almost exclusively on income from employment and pensions (82%)’.

‘An analysis of tax regimes and revenue highlights the gradual erosion of the personal income tax base as a result of the expansion of substitute and flat-rate schemes.’ The summary of the Court of Auditors’ Report on the General State Accounts explains that ‘the flat-rate scheme for VAT-registered individuals has reached over two million beneficiaries, with an estimated cost in terms of lost revenue of approximately 3.4 billion for 2025, significantly higher than the original forecasts, and with a gradual increase in the number of people making use of the scheme, which stands at 24.7 per cent compared with 2019’. ‘The digital services tax has consolidated its upward trend (+40.1 per cent), reaching 637 million, whilst the global minimum tax, in its first year of application, generated actual revenue of just 46 million against a forecast of 381 million’, it is noted. With regard to the activities of the Revenue Agency, it is noted that ‘voluntary tax revenue from the main taxes stood at 595.8 billion, up 2.8 per cent compared with 2024, with an overall increase of 51.8 billion over the three-year period 2023–2025’.

The stability of Italy’s public finances ‘remains exposed to extremely high external risks, particularly given that the instability of the global environment could necessitate significant revisions to economic scenarios in the near future and the consequent adoption of counter-cyclical policies designed to pre-emptively mitigate the negative effects of this persistent instability’. This was stated by the President of the Court of Auditors, Guido Carlino, whilst reading the report on the General State Accounts during the approval process for the General State Accounts for the 2025 financial year. In this context, ‘the acceleration of expenditure on projects—now nearing completion—funded under the National Recovery and Resilience Plan (PNRR) remains of particular importance, in order to ensure the achievement of its main objective of modernising the country, as well as the development of reform measures and investments aimed at extending the adjustment period of the Public Sector Budget (PSB) and likely to generate new pressures on expenditure attributable to defence spending, an ageing population, healthcare and the transformation of economies”, emphasises the Court of Auditors. Even with regard to ‘infrastructure’ expenditure – the main driver of growth – the importance is emphasised of decisions geared towards national cohesion, the reduction of disparities and the strengthening of accessibility, which requires careful consideration in view of the gradual waning of the effects produced by the resources injected into the system through the NRRP.

“There is a clear need, on the one hand, to maintain control over public finances and, on the other, to ensure a more careful selection of the measures to be implemented in order to counter the effects of rising energy prices and, consequently, to redefine priorities with an ever-greater focus on cost-effectiveness, which must guide the Government’s actions in determining the measures to be implemented,” emphasised the President of the Court of Auditors, Guido Carlino. “The tightening of budgetary margins requires a rigorous redefinition of spending priorities, including the rescheduling of certain sectoral increases, such as those allocated to defence, whilst maintaining safeguards to protect household incomes and corporate liquidity,” the President emphasised.