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Italy extends energy bill discount and petrol tax cuts

The Italian government has outlined plans to lessen the impact of the cost of living crisis, from extending energy bill discounts to cuts on fuel excise duties.

The French government has published guidelines on what to do if you are struggling to pay your energy bills.
The Italian government has announced further discounts on energy bills and caps on petrol taxes. (Photo by Ina FASSBENDER / AFP)

Italy approved a much-awaited set of financial measures on Monday to curb the soaring cost of living, driven by energy and fuel price hikes.

The stimulus package drawn up by Italy’s prime minister Mario Draghi is aimed at combatting the knock-on effects of the conflict in Ukraine, reportedly worth around 14 billion euros – double what was previously budgeted for.

READ ALSO: How to save money on your fuel in Italy

Energy bill payers will be able to take advantage of a government discount on gas and electricity bills for a further three months, as the government has extended the current ‘Social bonus for electricity and gas’ or ‘Bonus sociale energia elettrica e gas’ to the third quarter of 2022.

Energy bills have soared over the past year fuelled by the surging cost of gas imports, hitting a record in January. This has only been made worse since Russia invaded Ukraine, as Italy is more dependent on Russian imports of natural gas for energy than most of its European neighbours and produces very little of it within the country.

READ ALSO: Italy will ‘soon’ stop buying gas from Russia, says minister

In response, Italian authorities passed a new law in March for the second quarter of the year, aimed at lowering utility bills for those on lower incomes.

The bonus’s eligibility criteria had also been amended so that all homeowners with an ‘ISEE’, an indicator of household wealth, (Indicatore della Situazione Economica Equivalente) lower than €12,000 can benefit from the energy bill discount.

That marked an increase on the previous ISEE limit of around €8,000, meaning more bill payers can offset their energy bills – now, until September 2022.

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The government has also extended its previous cuts to fuel excise duties to July 8th. The move had been introduced in late March to put a brake on soaring pump prices, when petrol surged to highs of over €2 per litre.

In this case, the excise duty will fall to “zero euros per cubic metre” and there will be a reduction in VAT to 5 percent – previously 22 percent – while a cut to the price of methane is also expected.

The financial moves are included in the government’s new energy and investment decree (decreto energia e investimenti), which is yet to be published in its final version.

Draghi said the package is intended to “protect the purchasing power of families and the most vulnerable, and companies’ production capacity”.

“The measures will fight the higher cost of living. The price spiral depends on a large part on the cost of energy,” he added.

“And that means that is a temporary situation which has to be confronted with exceptional instruments.”

Also included in the upcoming decree is a cash bonus of €200 for around 28 million Italians with annual earnings of less than €35,000 for both workers and pensioners, in a bid to curb the rising cost of living.

In other measures, Italian authorities extended the building ‘superbonus 110’, to give homeowners more time to claim government aid for delayed renovation works.

Since Russia invaded Ukraine, the Italian government has already set aside some €15.5 billion for various economic relief measures. With the latest round of financial help, the country is expected to inject a total of two percentage points of GDP into the economy by the end of 2022.

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COST OF LIVING

What is Italy doing to fight rising cost of everyday goods?

The level of inflation in Italy reached 8 percent in June so what products are getting more expensive in the country and what measures are being taken by the Italian government to keep prices down?

What is Italy doing to fight rising cost of everyday goods?

Italy’s national statistics institute Istat has estimated inflation for June 2022 will hit 8 percent, up from the 6.8 percent in May, a record in the country that hasn’t seen such a spike in prices since January 1986.

“All of us in the government have the task of killing the inflation monster”, Minister for Public Administration Renato Brunetta said in an interview with the Quotidiano Nazionale on Sunday.

The minister said that the government is pushing for a price cap on gas and oil prices and calls for a “European agreement now” to regulate limits.

Any measures to create a ceiling for prices would need to follow European regulations, and EU countries must agree on them before members implement limits on fuel prices.

READ ALSO: EXPLAINED: What is Italy’s new digital invoicing rule for freelancers?

A major issue with rising prices is that wages lose their value, Brunetta explained. As a result, Italians can now buy fewer things with the same salary as one year ago.

Worker’s unions are looking to adjust collective agreements for wage readjustments, while companies fear that simply increasing salaries could prolong the crisis, Brunetta said.

What is the government doing to combat inflation?

The minister said then that the government is proposing a reduction in taxes incurred in workers’ wages to increase purchasing power without overburdening the employers.

He added authorities are also looking into “targeted and selective interventions”, including extending social benefits to low-income people.

Among the measures and proposals, he mentioned the targeted €200 bonus for Italian households to help with utility bills.

READ ALSO: Who can claim Italy’s €200 cost of living bonus?

The payments were announced in May alongside other government measures to offset the soaring cost of living, such as extending energy bill discounts and rolling on the deadline to claim Italy’s popular ‘super bonus 110’.

Pension amounts will also be reevaluated and adjusted for inflation more often and at higher rates, the minister said – the same with severance payments. He didn’t give further details, though.

Where can the increases be seen more dramatically?

Italy’s statistics institute says that “several types of products” have had price increases in the country, according to a press release. The main increase (48.7 percent year on year) can be seen in “energy goods”, such as fuel and gas.

READ ALSO: Italian property prices continue to rise in 2022

Food in Italy is also more expensive, both unprocessed food (9.6 percent increase) such as fruits and vegetables, and processed food (up by 8.2 percent). Recreational, cultural, and personal care services are also more expensive, up 5 percent compared to June 2021.

The institute says that the highest increases can be seen in housing, water, electricity and fuel supply. Or essential goods and living conditions for Italian households.

As fuel prices soar worldwide, Italians also see an increase in transport costs. The third sector with the most dramatic increases is food and beverage products, according to the institute report.

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