Italy hits banks with 40% windfall tax

The Italian Government has agreed to impose a one-off 40 per cent tax on the profits banks have earned due to higher interest rates, saying that the income will be used to help those with home loans and to cut taxes.

Italy’s banks have reacted by decrying the move as “substantially negative” for the sector.

The move, which is expected to net the public purse around between €2 billion and €3 billion, has also led bank shares to plummet.

The European Central Bank’s continuing increases to base interest rates has led banks’ income to soar as the gap between its lending and deposit rates widens.

The difference, termed net interest income, is will be subject to a one-time windfall tax, if the Italian parliament passes it into law.

Italy’s two largest banks, Intesa Sanpaolo and UniCredit, saw their shares drop by eight per cent and 6.5 per cent respectively following the announcement.

Shares in Banco BPM, the country's third-largest bank dropped 8.2 per cent, while the state-owned Monte dei Paschi di Siena dipped by 7.4 per cent.

Italy’s Deputy Prime Minister, Matteo Salvini, said: “One only has to look at the banks’ first-half 2023 profits, also the result of the European Central Bank’s rate hikes, to realise that we are not talking about a few millions, but we are talking, one can assume, of billions .

“If [it is true that] the burden deriving from the cost of money has … doubled for households and businesses, what current account holders receive has certainly not doubled,” Minister Salvini added, saying there was a large gap between the rates applied to loans and those to deposits.