State revenue still on course: an extra 13.8 billion in the budget

We do not need corrective manoeuvres because "miraculously we got the forecasts right", Giancarlo Giorgetti joked a fortnight ago, confirming in the Senate question time the government's official goal of reducing the deficit to 3.3% this year and then to below 3% in 2026. However, in the papers of the confrontation with the Monetary Fund, published with the latest country report, an even more decisive 'miracle' than the one evoked in Palazzo Madama by the Minister of the Economy peeped out, with the hypothesis of a further advance in the return of net indebtedness below the Maastricht threshold. Because the 'preliminary data suggest that Italy may be able to exit the excessive deficit procedure as early as next year', thus closing 2025 just below the fateful 3%, as stated in the 'Buff statement', the IMF executive director's statements for Italy that incorporate the comments of Bankitalia and Mef. Sticking to the official programme, on the other hand, the goodbye to the procedure would come in 2027 after the examination of the 2026 balance sheet. What are these hopes based on?

Their origin can be sought in the budget adjustment, which is now awaiting final approval by the Chamber of Deputies after the green light obtained last Thursday in the Senate. There is not all the answer there, because the traditional mid-year adjustment improves net borrowing by only 500 million (Sole 24 Ore, 1 July), and the path to 3% is still long and surrounded by unknowns. But important indications are to be found in the most important parts of the 4,314 pages of the document, usually surrounded by an almost choral disinterest on the part of politicians despite reporting data more anchored to actual reality than the autumn budgets that instead ignite endless debates.

A few numbers frame the dynamics. First of all, final revenues, those net of loans, grew by 13.883 billion with respect to initial forecasts (15.729 billion in cash terms), thus reaching 744.637 billion, an increase of 2.2% with respect to the basic assumptions. Unfortunately, expenditure also increased, which accumulates 13.109 billion more driven by the now customary rush of tax credits (to businesses and construction) together with offsets and tax refunds. But it is the rush of receipts that is a now habitual feature of the Italian budget, which from the positive surprises in the revenue column has already managed several times in the last year and a half to correct downwards the deficit estimates. The engine is once again ignited by income tax substitutes, in particular withholding taxes on interest and premiums from credit institutions, which point 5.99 billion above initial forecasts. But growth is also brisk in Irpef, which puts up +1.95 billion while Ires pushes up 440.8 million. So much fiscal cheerfulness may come as a surprise after April's Public Finance Document had to halve, from +1.2% to +0.6%, the growth forecast for GDP (a slowdown that is felt on VAT: -1.06 billion)..

But its genesis can be traced to a mix of several factors: the starting point is in the traditional prudence in the projections of the Ragioneria, useful to build financial buffers for every eventuality. On this basis, there is the constant increase in employment, which broadens the number of taxpayers and also rows in the same direction as 'tax compliance', that set of initiatives put in place to push spontaneous compliance with tax obligations with some success also recognised by the Court of Auditors.

To solidify the numbers, then, there is the effect of fiscal drainage, those 23 billion a year of extra revenue generated by inflation (estimates based on UPB data) that are repeated in the years following the price hike. On the side of extra-tax revenues, the extra billions are 7.33 billion and come mainly from the stocks of the bank resolution fund (2.5 billion), from the dividends of the participations (1.3 billion) and from games (585 million).
A large part of these variations do not affect the public finance balances because they are already incorporated in the estimates of the April Dfp, or because they are excluded such as the grants of the NRP. On the net indebtedness, 1.4 billion more revenues and 900 million more expenses are felt, which project the deficit of the consolidated PA to 73.5 billion (3.26% of GDP).
But the dynamics trace a path that may offer some other good news in perspective. As is the case, for example, on interest: the forecast for debt service expenditure falls by 2.38 billion, thanks to the calm shown by yields.