Italian Prime Minister Giorgia Meloni’s government had floated the idea earlier this year, but the plan then appeared to have “cooled”. A senior bank manager told Reuters that the bankers were prepared to be hanged, “but at that time the ax was still in the air.”
A source in the government told the Reuters agency that this step was a surprise even to some ministers at the meeting of the Cabinet of Ministers on Monday evening. On the other hand, another source clearly stated that the government intends to “punish the dishonest behavior of banks”.
Speaking at a press conference in Rome, Deputy Prime Minister Mateo Salvini said: “It is enough to look at the profits of the banks in the first half of the year to understand that it is not about a few millions, but billions.”
“Yes, it is true that the burden of cash costs on households and businesses has doubled, but what current account holders receive has certainly not doubled,” said Salvini.
Hopes to collect two or three billion euros
The Italian edition of the media platform “ShareCast” has estimated that this step will bring in about two billion euros, but there are other media that express that the Italian Treasury plans to get as much as three billion euros.
The government wants to use this revenue to help those struggling with the cost of living, such as mortgage payers.
The Italian left-wing press is fiercely criticizing
“Italian market turmoil has wiped out $10 billion from bank stocks after a shocking surprise tax introduced by the right-wing government,” writes the media platform “Fortune”, which is in opposition to the Italian government, pointing to the sharp drop in the value of Italian bank shares this week by almost 8% on the stock exchanges. “Fortune” has long criticized the government of George Meloni or called it populist at every step and the imposition of a tax on bank profits. Economic analysts estimate that the tax will destroy 12% of banks’ income.
There are such peculiarities in Italian domestic politics that the left-wing press attacks the right-wing government, although in the classical sense, the imposition of the bank profit tax should be evaluated as a left-wing political decision. Since July 2022, the European Central Bank has raised the interest rate on the largest deposits from 0.5% to 3.75% in an effort to fight inflation. But bank profits soared because lenders were able to raise the cost of loans faster than the rates they paid depositors. Italian banking has grown by 50% over the past year, outpacing the 20% increase in the overall European sector. Italy will only apply the tax in 2023 and the banks will pay the amounts until June 30, 2024.
Stocks fall, but no return Italian government decision sent Italian shares lower on Tuesday, with shares in UniCredit, Fineco Bank, Intesa San Paolo and Banco BPM down between 6% and 10% from the afternoon session. session in Milan. John Bilton, head of global asset strategy at JP Morgan Chase Bank, told Bloomberg TV’s Francine Laqua that the measure raised concerns “about the motivation behind Italian economic policy.” He added: “This will certainly give investors some pause for thought when it comes to pricing Italian credit risk and German credit risk. It will be a few days to see how the markets digest this.”
With Italy, the noise is bigger than other times
There is also a reaction to the Italian government’s decision in the media of other countries, where the most common headlines are that it is “surprising” and “unexpected”. Polish media platform “wnp.pl” notes that Italy’s GDP fell by 0.3 percent in the second quarter of this year. Falling budget revenues forced the Italian government to look for new sources of income, and the government unexpectedly introduced a 40% tax on bank profits without consulting the industry.
In fact, in the European context, it is no longer anything particularly surprising. Several countries have already introduced excess profits tax for the energy and banking sectors. However, the case of Italy has probably exceeded the “critical mass”, and now this “surplus profit”, “extraordinary”, “solidarity” tax, or “windfall tax” in English, is on the agenda of the government of every European Union country, whether they like it or not.
What about Spain, Czech Republic, Hungary, Lithuania, Sweden and Great Britain?
After an extremely tough push and shove between the banking lobby and the government, banks in Spain will have to pay a levy of 4.8% on net interest income plus net commissions. Spain hopes to collect three billion euros in this way.
Even more furious than Italy, the lower house of the Czech parliament has already acted last fall, approving a 60% additional tax on energy companies and banks to raise $3.4 billion this year from profits that were considered excessive. The money is intended to fund relief for people and businesses affected by rising electricity and gas prices.
Hungary has had a bank profit tax since last year, but in June this year the government decided to take a more lenient approach and published a decree adjusting the extraordinary taxes imposed on key sectors of the economy, stating that banks can reduce their 2024 extraordinary tax payments by up to 50% , if they increase purchases of Hungarian government bonds.
In May, the Seimas of Lithuania approved an extraordinary tax on the net interest income of the banking sector for 2023 and 2024. It is estimated that the 60% tax on that part of the net interest income, which is 50% higher than the average of the previous four years, will collect 410 million euros in the state budget. The money will be used to support the army and civil infrastructure projects.
The Swedish government last January imposed a “risk tax” of more than 150 billion Swedish kroner ($14.1 billion) on companies across a range of sectors to bolster public finances and create headroom to cover the costs of a financial crisis.
Britain has not introduced an emergency bank levy, but since 2011 it has levied a bank levy, introduced in response to the financial crisis, on the global balance sheet assets of UK banks, as well as assets held by foreign banks in the UK.
Some countries run away from capital gains tax like the devil from a cross
There are also countries that go the other way and run away from the extraordinary capital gains tax like the devil from a cross. Some of Germany’s biggest banks have seen net interest income rise by 50% to 70% from pandemic-era lows, but the excess profits tax has not even been a topic of discussion in the German government. Germany’s finance ministry has refused to comment on Italy’s decision and bluntly stated that tax increases are ruled out under the German coalition government’s agreement.
Likewise, the Estonian government and the majority of the Rīga Kogi parliament do not want to hear anything about the surplus profit tax. Maybe in Estonia the game really wouldn’t be worth the candle and the benefit from the tax would be less than the problems. Who knows…
In Latvia, they are trying to confuse and prolong the fear of the lobby of commercial banks
In this acute situation, Latvian “politics” tries to push the topic of emergency tax to the farthest shelf possible and mention it as rarely as possible. Finance Minister Arvils Asherdens (JV) even spoke supportively in the spring that such a tax could perhaps be introduced – clarity on this issue will be this month – in August. Read the article here.
In the spring, consideration of this issue was handed over to the coalition’s financial working group, so that it could be drowned out there and that no specific decisions would be made, or at least the case would be dragged out as long as possible. This fall, the “major” reform ideas of Latvia’s tax policy will be brought to the fore, but it is unlikely that the introduction of an emergency tax will also have a significant place in this mess.
Meanwhile, the lobby of commercial banks is actively working both openly and “under the hood” so that the government does not think of touching the “sacred cow” – the banks. “The decision on the surplus profit tax for banks in Lithuania will reduce lending and budget revenues,” fears Sanita Bajāre, chairman of the board of the Latvian Financial Industry Association.
Bank profit – simply insane
The largest Latvian commercial bank – “Swedbank”, owned by Swedish shareholders – had a profit in Latvia of 135 million euros last year, which is 55.17% or 48 million euros more than in 2021. The second Swedish-owned bank SEB banka’s operating profit after taxes and provisions in the 12 months of 2022 has reached 80.4 million euros, which is 29% more than a year ago.
The profit of “Luminor banka” was 124.7 million last year, or 50 million more than in 2021, when it was 74.7 million. Increase – 62.3%. The preliminary profit of “Citadele” bank in 2022 was 42.183 million euros, which is 42.3% more than in 2021.
Meanwhile, the volume of mortgage loans issued last year decreased by 7% compared to 2021. This year it will probably be even less. This is because banks can calmly and relaxed not risk anything – service accounts and “boil” at the expense of anti-inflation measures of the European Central Bank.
2023-08-10 02:15:01
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