Italy’s Plan to Raise Tax on Short-Term Rentals Sparks Division Within Ruling Coalition
Italy’s government has revealed a plan to raise the flat-rate tax on short-term rentals, a move that has sparked division within the ruling coalition. The proposed change, which is part of the 2026 budget draft, would see the current two-tier system scrapped, with all property owners paying a flat tax rate of 26%. Currently, the flat tax is 21% on the first rental property and 26% on additional properties.
The five percent increase is being justified as part of broader fiscal efforts to address public finances, with Premier Giorgia Meloni’s government seeking to stabilize revenue and manage economic risk. However, the tax hike has triggered immediate pushback from Meloni’s coalition partners, with the right-wing Lega and center-right Forza Italia publicly opposing the move.
Tourism vs Fiscal Responsibility
Italy, a major global tourist destination, has seen its vacation-rental market flourish in recent years, with billions of euros of rental income generated nationwide. Under the current 21% rate, many small landlords have benefited from a relatively simple tax regime for single properties let out short-term. However, the new 26% rate threatens to reduce net returns, potentially discouraging investment or leading to higher rental prices for tourists.
According to estimates, for typical households renting out a property for short tourist stays (up to a month), the tax rise could translate to roughly €1,300 extra per year. This has raised concerns among tourism-heavy regions and local property associations, who argue that the net impact might be higher costs for homeowners or reduced supply of short-term units, both unfavorable for a sector still recovering from pandemic disruptions.
Coalition Rifts and Parliamentary Uncertainty
The announcement has exposed fault lines within the coalition government, which this week marked three years in office. While Meloni’s cabinet still controls a majority, public disagreements reveal internal tensions. Lega leader and Deputy Prime Minister Matteo Salvini told state broadcaster RAI Tre that the measure “will not be approved” and pledged it would be repealed or revised during the parliamentary debate.
Antonio Tajani, Deputy Premier and leader of Forza Italia, described the measure as “a mistake that can be corrected.” The open criticism of a key budget proposal raises questions about discipline and cohesion within the coalition, which could delay approval of the budget or force compromises that dilute its fiscal impact.
What it Means for Property Owners and Tourists
For individual landlords, the message is clear: net income from short-term rentals is likely to shrink under the proposed tax rise. Some may consider shifting to longer-term leases or exiting the market altogether, reducing availability of tourist-friendly housing in popular destinations. For tourists, fewer short-term units or higher rental prices may be the knock-on effect, particularly in smaller towns where accommodation supply is more limited.
Local economies that rely heavily on holiday-lettings may see some secondary impact if owners scale back operations. On the policy side, the proposed reform underscores a broader shift in Italy’s approach: using taxation as a lever to stabilize revenue and manage economic risk, rather than relying purely on growth and consumption. As the parliamentary debate unfolds, it remains to be seen whether the government will revisit the proposal or push forward with the planned tax hike.