Italy’s 2027 IRPEF reform shifts authority over the additional tax to regions, letting them set or abolish the levy
Executive summary: The Italian government announced that, starting in 2027, regions will be free to abolish the IRPEF additional tax or establish new income‑based exemptions by setting their own thresholds. This changes the structure of a national tax, affecting regional revenues, household disposable income, and the overall distribution of the tax burden across Italy.
Who is involved: Italian regional governments, the national Treasury, and taxpayers (employees and pensioners) are the primary actors.
Likely next: Regions will draft and vote on their IRPEF additional‑tax rules during late 2026, with the first applications taking effect from 1 January 2027.
From 1 January 2027 Italian regions will gain the power to either eliminate the IRPEF additional tax or create new exemptions for low‑income earners by defining their own thresholds. The move is part of a broader fiscal‑decentralisation effort that follows recent government statements on the deficit target and the upcoming financial plan (Dpfp). While the measure aims to give regions more budgetary flexibility, it also creates potential tax competition and uncertainty for households and businesses operating across regional borders.
What's next — scenarios
Base: status quo retained (40%)
Most regions keep the current additional tax rates, resulting in minimal change to national tax revenue and household burden.
- No regional legislation to modify the additional tax by 31 Dec 2026
- National government maintains existing IRPEF brackets
Upside: widespread tax cuts (30%)
Several regions abolish the additional tax, boosting disposable income for low‑ and middle‑income earners and stimulating regional consumption.
- At least five regional councils approve abolition laws by 31 Dec 2026
- Published regional tax‑rate tables show zero additional tax for 2027
Downside: tax increases for revenue (30%)
Some regions raise the additional tax to compensate for lower central transfers, increasing the tax burden on residents and potentially dampening local demand.
- Regional finance offices publish projected budget shortfalls >5 % of 2026 revenues
- Regional tax‑rate tables show higher additional‑tax percentages for 2027
What to watch
- Regional tax‑legislation drafts (deadline 31 Dec 2026)
- IRPEF additional‑tax revenue reports Q1 2027
- Approval timeline of the Dpfp and 2026‑2027 manovra (expected Oct 2026)
- Published regional IRPEF threshold tables for 2027
Timeline
- — Riforma Irpef: il gioco dell’addizionale. Ora il costo delle tasse lo sceglie la Regione (la Repubblica — Economia)
Analysis — what this means
Likely next events
- From 1 Jan 2027 regions may set or cancel the IRPEF additional tax
- Draft of the Dpfp (document preceding the manovra) to be presented week of 28 Sep 2026
- Fiscal‑drag effect estimated at €13 billion on wages and pensions for the 2026‑2027 biennium
Sectors affected
- Household consumption
- Regional public finance
- Retail and services
Regulatory implications
- Italian regions acquire legislative competence to modulate the IRPEF additional tax starting 2027
- National tax brackets remain unchanged; regions only adjust the additional levy or exemptions
- Deficit target of < 3 % for 2026‑2027 remains in the government’s financial plan
Key entities
Sources
- Riforma Irpef: il gioco dell’addizionale. Ora il costo delle tasse lo sceglie la Regione — la Repubblica — Economia
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