Italy to Hike Tax on Profits of Energy Firms to Fund Aid Package

(Bloomberg) -- Italy is set to raise a tax on additional profits made by energy companies due to rising prices to help finance a new 14 billion-euro ($14.7 billion) aid package, according to people familiar with the matter.

The latest aid package, to be approved Monday, will provide further support to companies and consumers hit by surging energy costs, a trend that has been exacerbated by the prospect of reduced gas flows from Russia.

The measures will be partly financed with the unspent portion of 10 billion euros of borrowing that was unveiled in April and by increasing the tax on windfall profits made by some energy companies, according to the people. While a decision on the scope of the tax hike has not yet been made, the government discussed more than doubling the current 10% levy.

Earlier Monday, the government extended a tax cut for fuel at the pump by 25 cents per liter until July 8, said one of the people, who asked not to be identified because the plans are confidential.

The Italian government has spent more than 20 billion euros this year to shield its economy from soaring energy prices and has taken dramatic steps to reduce its reliance on Russian supplies, which account for about 40% of gas imports. The new measures come as the European Union debates an additional round of sanctions that would phase out Russian oil by the end of the year.

While Prime Minister Mario Draghi has so far resisted pressure from political parties to further widen Italy's deficit, calls to expand cost-saving measures are expected to grow louder in coming weeks, in particular if the EU quickly agrees on a new sanctions package.

The EU is also trying to maintain a united front in rejecting a Russian demand to pay for gas in rubles, a move the bloc says would violate sanctions. Russia has already cut off gas to two EU members -- Poland and Bulgaria -- that have refused to abide by the payment demand.

The bloc's energy ministers met on Monday to chart a path forward. At least one country, Hungary, has already said it would accede to Moscow's demands.