Italy’s announcement of a 40% windfall tax on the profits of banks sent shockwaves throughout the continent, leading to a nearly 3% drop in Europe’s main bank stock index. Traders were caught off guard, and the move triggered widespread backlash. The Italian government, facing the negative market reaction, was forced to quickly reconsider its plans within 24 hours. Despite the subsequent toning down of the proposal, analysts and policymakers continue to criticize the tax.
Carlo Calenda, national secretary of the Azione political party and Italy’s former deputy minister of economic development, labeled the tax as a “very stupid law.” He warned that international investors could be deterred from making long-term investments in Italy if the government has the power to arbitrarily take a portion of their profits. Calenda’s concerns highlight the potential damage this tax could inflict on the country’s reputation and its ability to attract foreign investments.
While the ruling coalition government’s leading party, Brothers of Italy, believes that banks have not passed higher rates onto savers, other members of the government have a more nuanced stance. Italy’s Economy Minister, Giancarlo Giorgetti, stated that the tax “can certainly be improved upon” but defended its fairness. He acknowledged the need for revisions but rejected the notion that it is an unfair tax. Antonio Tajani, the country’s foreign minister and leader of the centre-right Forza Italia party, emphasized the importance of distinguishing between large and small lenders and suggested engaging banks to improve the text of the law.
Intesa Sanpaolo, one of Italy’s largest banks, expressed its dissatisfaction with the tax. Chairman Gian Maria Gros-Pietro argued that it is not the right time to reduce lending capacity and criticized the government’s communication regarding the tax. He called for the measure to be a one-off event, suggesting that the recent economic climate does not warrant such a burden on banks.
Italy’s controversial tax on banks has been met with widespread criticism from experts and key players within the ruling coalition government. Concerns about deterring international investors and damaging the country’s reputation have been voiced, undermining the government’s insistence on the tax’s fairness. The ongoing study of how to implement the tax reflects the need for careful consideration of its potential consequences. As tensions persist, it is evident that further discussions and revisions are necessary to address the concerns of both skeptics and industry leaders.
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