The Italian cabinet signed off on a 2019 state budget that will cut tax benefits that banks can book on loan write-downs and that will raise advance taxes that insurers must pay on premiums, Reuters reported Oct. 16.

The budget stipulates that tax deductibility on write-downs under new accounting rules known as IFRS 9 will now be spread over 10 years instead of one. Additionally, it pushes back a 10% tax deduction rate on bank loan losses for corporate and regional tax purposes to the end of 2026.

Meanwhile, from 2019, insurance firms will have to pay 75% of taxes on premiums in advance, up from 59%. This rate will increase to 90% in 2020 and to 100% in 2021.

The tax changes are designed to fund increased welfare spending, which contributed to a widening of the deficit in the proposed budget to 2.4% of GDP, from 1.8% in 2018. Although the target is below the EU's 3% ceiling, it has unnerved financial markets and breached EU regulations that call for Italy and similarly highly indebted countries to reduce budget deficits gradually toward zero.