Italy's Economy Minister Suggests Enhancements to the Windfall Tax on Banks

04 Sep, 2023

Italy's Economy Minister Suggests Enhancements to the Windfall Tax on Banks

Italy's recently introduced tax on bank profits has come under scrutiny, as Economy Minister Giancarlo Giorgetti voiced his belief that there is room for improvement, while firmly rejecting claims of unfairness. Speaking at The European House - Ambrosetti economic forum, Giorgetti acknowledged, "It may be that the tax is inappropriate, it can certainly be improved upon ... but I do not accept that it is considered an unfair tax."

The Italian government made a surprising move last month by imposing a one-time 40% tax on bank profits stemming from increased interest rates. This decision followed criticism of banks for not adequately rewarding deposits. The announcement initially led to a decline in bank shares, prompting the economy ministry to clarify that the tax would only amount to 0.1% of banks' total assets.

During the forum, around 33% of attendees polled expressed strong reservations about the tax, while two-thirds held overall negative sentiments. Giorgetti, a member of the League party, countered these concerns, asserting that the tax was fair and that the government had provided significant guarantees to support the banking sector.

Despite defending the tax, Giorgetti issued an apology for the clumsy handling of the proposal's announcement, which came as a surprise during a late August news conference by the deputy prime minister. He assured, "I can assure you that I take full responsibility for communication errors, but in the end, the final version will be something that everyone can appreciate."

In the political arena, the co-ruling Forza Italia party, led by Antonio Tajani, expressed its desire to exempt returns on government bonds from the new tax to avoid affecting future government bond auctions. Additionally, Forza Italia sought an exemption for small banks and sought guarantees that the levy would not be extended beyond 2023. Giorgetti did not comment on his government ally's proposals regarding the bank tax.

Regarding the privatization of Monte dei Paschi di Siena (BMPS.MI) bank, Giorgetti provided no specific timeline, despite Tajani's call for swift action. He stated, "We will solve it calmly but without letting anyone dictate the timings as far as the banking system is concerned."