By Giuseppe Fonte and Gavin Jones
ROME (Reuters) -Italy is considering increasing by some 2 billion euros ($2.27 billion) funds set aside to curb energy prices next year, using resources previously planned to cut income and business taxes, three government sources said.
With international energy prices soaring, Mario Draghi's government has already spent more than 4 billion euros this year to try to rein in utility bills by compensating companies that agree to cap their tariffs.
Draghi set aside a further 2 billion euros for next year in the 2022 budget approved by cabinet in October, but with energy cost pressures continuing to drive consumer price inflation, the government is now considering doubling that sum.
The money can be found because the government will use less than the 8 billion euros earmarked in the budget to cut income and business taxes, the sources said, asking not to be named because of the sensitivity of the matter.
With the Treasury aiming to trim the budget deficit to 5.6% of gross domestic product in 2022 from the 9.4% targeted this year, resources are limited.
The cabinet is likely to discuss the matter on Friday, one of the sources said.
The tax cut will focus mainly on income tax (IRPEF), reducing the number of tax rates to four from five, with the largest benefit going to middle-income tax-payers earning between 28,000 and 55,000 euros per year.
According to a preliminary deal reached among the ruling parties, the first tax band on annual income between 8,000 and 15,000 euros will be left at 23%. The second band, between 15,000 and 28,000 euros, will be lowered to 25% from 27%.
The third band, on income from 28,000 to 55,000 euros will get a more substantial cut to 35% from 38%.
The fourth band, on income from 55,000 to 75,000 euros will rise from 41% to 43%. This is the rate that is currently applied on income above 75,000 euros, effectively cancelling the fifth income tax band.
Draghi has been meeting delegations this week from parties in his national unity coalition to hammer out the details of the tax reform.
($1 = 0.8828 euros)