Italy is considering asking energy companies to contribute more to the public finances, as the government searches for ways to fund tax reductions and additional spending in its 2027–2029 budget. The proposal may sound straightforward: when energy prices rise and some companies benefit, part of those gains could help relieve the pressure on households and public finances.
The economic consequences, however, are less straightforward.
According to Reuters reporting by Giuseppe Fonte, the government is examining a further increase in the regional tax on productive activities, known as IRAP, for companies involved in producing, distributing and supplying energy. Another possibility is extending the existing higher rate through 2029.
Earlier this year, Italy increased the relevant rate from 3.9% to 5.9% for 2026 and 2027, expecting approximately €1 billion in additional revenue over the two years. No decision on a further increase has yet been announced.
The question is not simply whether energy companies should pay more tax. It is whether an additional levy would provide lasting relief without discouraging the investment Italy needs to reduce its exposure to volatile international energy markets.
A difficult balance
The government faces competing pressures. Higher energy costs affect household purchasing power and business competitiveness, while rising borrowing costs restrict the room available for public spending.
At the same time, some energy companies have reported stronger profits. That makes them an attractive source of additional revenue, particularly when governments are being asked to protect consumers from price increases.
But energy businesses are not identical. Producers, refiners, distributors and suppliers have different cost structures, margins and investment requirements. A broad increase in taxation may affect them differently, even when it applies across the same sector.
There is also a distinction between taxing exceptional profits and permanently increasing the ordinary tax burden. The former is intended to capture gains associated with unusual market conditions; the latter changes the longer-term economics of operating and investing in the sector.
Beyond the immediate budget
Italy’s dependence on imported energy makes this debate particularly consequential. Tax revenues can help finance short-term relief, but they cannot by themselves reduce exposure to future supply disruptions or international price shocks.
That requires sustained investment in generation, infrastructure, efficiency and diversification. Fiscal measures should therefore be assessed not only by the revenue they raise today, but also by their effect on the investments that could make tomorrow’s energy system more resilient.
The European dimension matters too. The European Commission is examining the possibility of an EU-wide levy on exceptional oil and gas profits. A coordinated approach could potentially reduce differences between national tax regimes, although its design and legal feasibility remain unresolved.
For Italy, the immediate challenge is to explain what additional taxation would achieve, who would ultimately bear its costs and how any resulting revenue would be used.
THE ITALIC View
Asking profitable energy companies to contribute during a period of economic strain is a legitimate political choice. But the quality of that choice depends on its design, not its popularity. Italy needs a fiscal policy that protects vulnerable households while preserving incentives to invest in a more secure energy system. The real test is whether a new tax would merely help balance the next budget or contribute to reducing the country’s vulnerability to the next crisis.