The Italian government is introducing a tax on banks’ “extra profits” – with a few extra modifications. This makes them completely ineffective.
Is it about social justice? Infrastructure Minister Matteo Salvini Photo: Remo Casilli/Reuters
ROME taz | It was announced big: the Excess profits tax for Italy’s banks, which only became law a month ago. It was supposed to pour billions into the state coffers. But the revenue from this tax simply does not appear in the draft budget for 2024, which is currently being discussed in the parliament in Rome.
This is somewhat surprising, since according to the new law, at least 40 percent of the “extra profits” – as they are called here – should be skimmed off: those profits that are due to the increase in interest rates on the loans granted by the banks. And this additional income will bubble up strongly in 2023. The forecasts say that banks will have profits of 43 billion euros at the end of the year, a proud increase compared to the 25 billion in 2022.
On the other hand, many citizens in Italy are also complaining about the increased interest burden on their real estate loans, for example. When he announced the excess profits tax for the banks last August, Matteo Salvini, deputy prime minister and head of the right-wing populist Lega, also announced that it was about “social justice”. With the measure, the government wants to gain resources in order to be able to help borrowers in need.
“Provisions” are both a relaxation and a trick
The government had originally calculated at least 3 billion euros in additional tax revenue, and this increase would have been very welcome given the sluggish economy. But due to loud protests from the banks, the right-wing coalition under Giorgia Meloni agreed to a modification of the law, which is now proving fatal.
If banks make provisions to strengthen their equity capital, their tax liability is reduced, and if they set aside 2.50 euros for every 1 euro of excess profits tax to be paid, they no longer pay any tax at all.
Almost all banks in Italy took this step. They took advantage of their brilliant earnings situation to reduce their excess profits taxes to zero. At the same time, Bank Intesa San Paolo, Italy’s largest institution, wants to pay out 5.8 billion euros in dividends.
