Italy's economy minister rules out additional bank taxes
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- 12 Aug 2024
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It seems that the Italian government is trying to calm the nerves of investors and bankers by ruling out additional taxes on bank profits. Economy Minister Giancarlo Giorgetti's statement is a clear attempt to quash speculation about new levies on banks and other companies.
The minister's comments are likely a response to the sell-off in domestic banking shares last August, which was triggered by the government's surprise 40% tax on profits made by banks due to the spike in interest rates. The government's subsequent backtracking and offer to allow banks to boost capital reserves instead of paying the levy likely helped to ease tensions, but the recent speculation about new taxes seems to have reignited concerns.
Giorgetti's statement that banks will be called upon to contribute to public finances like all residents, but without any additional tax on "extra" profits, is a reassuring message to the banking sector. The fact that Italy's biggest bank, Intesa Sanpaolo, has already reported higher tax payments due to the benefits of higher interest rates suggests that banks are already contributing significantly to the country's public finances.
It's worth noting that the Italian government's approach to taxing banks is likely influenced by the country's economic situation and the need to balance its budget. With euro zone interest rates at a peak, Italian banks have been able to reap significant profits from the gap in lending and deposit rates. However, the government will need to strike a balance between taxing banks fairly and avoiding measures that could stifle economic growth or drive banks to relocate to more favorable jurisdictions.
