Italy

Italy Imposes 40% Windfall Tax on Bank Profits

AUG 8 2023·Updated AUG 9 2023

Story

Image credit: Unsplash

The Facts

On Monday, Italian PM Giorgia Meloni approved a one-off 40% windfall tax on record-breaking profits earned by Italian banks due to increased interest rates, stating that the proceeds will be used to help mortgage holders and cut taxes.
BBC News
Following the announcement, Italy's banking share index plunged 7.3% on Tuesday, with shares in the country's two largest banks, Intesa Sanpaolo and UniCredit, dropping by 8% and 6.5%, respectively.
Reuters
Italian banks have reportedly passed just 12% of the rise in rates onto depositors compared to the Eurozone average of 22%. The windfall tax is expected to cost Italian banks between 2% and 9% of their earnings.
CNN
The 40% tax is set to apply to all 2023 profits and will be due by mid-2024. Analysts claim Meloni's government could collect as much as €4.9B from Italy's largest publicly listed banks.
Guardian
The windfall tax will specifically apply to the bank's net interest margin, which measures the net return on earning assets such as loans, leases, and investment securities.
EuroNews
Banks will be required to pay the 40% tax if their 2022 net interest income exceeds the value of the financial year 2021 by 3%, while the threshold rises to 6% for 2023.
Al Jazeera

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The Spin

Establishment-critical narrative

Italy's government has recognized the need to balance helping businesses with reining them in when profits surge out of control to the detriment of the public good. Italian banks have made record-breaking profits and have avoided passing anything on to their customers. There is no reason for banks to keep billions in excess profits while millions struggle to pay off their inflated mortgages and other loans.

The London Economic

Pro-establishment narrative

Meloni's populist party have opted for an easy win with the electorate who are currently facing a cost of living crisis. However, the repercussions of this sudden and unexpected economic policy remain to be seen, as diminishing banking revenue could have influences on future investment and fiscal stimuli. Having already wiped value off of banks' stocks, this policy could continue to backfire for Italy's economy.

Fortune