2023-08-08 17:01:44
– Italy decides to tax the profits of banks
Italy intends to levy a tax of 40% on the “surplus profits” of banks generated by the rise in interest rates. A surprise decision which on Tuesday caused the tumble of securities in the financial sector on the stock market.
Posted today at 7:01 p.m.
Rate hikes by the European Central Bank have boosted bank profits and hurt their customers who are bearing the brunt of the increase in their borrowing rates, Salvini laments.
KEYSTONE
Deputy Prime Minister Matteo Salvini announced on Monday evening that the government plans to tax banks’ “excess profits” to offset the cost to households and businesses of soaring interest rates.
The rate hikes practiced by the European Central Bank have boosted bank profits and harmed their customers who are bearing the brunt of the increase in their borrowing rates, Salvini lamented after a Council of Ministers.
“It’s not a few handfuls of millions, but a few billions. It is a measure of fairness, ”assured the boss of the League, a far-right party member of the government coalition.
On the Milan Stock Exchange, all bank stocks fell. Intesa Sanpaolo and Unicredit lost 8.6% and 5.9% respectively at the close. Monte dei Paschi di Siena fell by 10.8%, Bper Banca by 10.9% and Banco Bpm by 9%.
“Bad news”
The government’s announcement took the industry and analysts by surprise. “This is unexpected bad news,” commented experts from Banca Akros, estimating that banks’ earnings per share will be cut by 7% on average.
“We have been saying for months that the European Central Bank is wrong to raise interest rates”, and this taxation “is the inevitable consequence”, assured the other Deputy Prime Minister, Antonio Tajani.
“It is not a measure against banks, but it aims to protect families,” he argued, adding that “the measure will only last for one year”. The proceeds will be used to reduce the tax burden on businesses and households that have had difficulty meeting their mortgages. The tax on bank “excess profits” will concern the accounting years of 2022 or 2023.
The 40% deduction will be made either on the part of the net interest income for 2022 exceeding the amount for the 2021 financial year by at least 5%, or on the profits for 2023 for which the threshold is set at 10%, said the government.
Giorgia Meloni thus intends to mobilize funds for the budget for 2024. For the moment, he lacks resources due to the surprise decline in gross domestic product of 0.3% recorded in the second quarter. This tax could yield between two and five billion euros, according to analysts’ estimates.
Italy had already introduced a tax on the “excess profits” of energy giants in 2022, which brought in 2.76 billion euros.
Soaring profits
Italian banks, like their European competitors, have seen their income generated by interest soar in the wake of the rise in interest rates, without increasing the remuneration of their customers’ current accounts.
Intesa Sanpaolo saw its net profit jump 80% to 4.2 billion euros in the first half. Its rival UniCredit posted a half-yearly net profit of 4.4 billion euros.
The taxation of banks has elicited mixed reactions. The unions applauded, like the ICFTU, which saw it as a “fair” measure which “should be extended to other multinationals”. “It is an extremely controversial tax” which seems to be inspired by Spain, commented Francesco Galietti, founder of the consultancy firm Policy Sonar.
“Uncertainty is at the rendezvous” in Italy with this tax which “came out of nowhere” while the Minister of Economy Giancarlo Giorgetti had worked to silence speculation on such a project, commented the Jefferies analysts. The minister had indeed declared at the beginning of June that a tax on banks was “not on the agenda”, taxing such a measure as “demagogic”.
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