Italy Introduces 40% Tax on Banks’ Windfall Profits

The Italian government has introduced a one-time tax of 40% on banks’ profits, with the collected funds intended to assist individuals taking out mortgage loans for the purchase of their first property.

The sharp rise in central bank interest rates has brought record profits to banks, as they were able to pass this increase onto loan users while not significantly raising deposit interest rates. Countries like Spain and Hungary have already implemented taxes on the excessive profits of the banking sector.

This year, the Italian government will tax banks’ net interest margin with a one-time tax of 40%, which represents the difference between interest on loans and deposits and is a source of banks’ earnings. It is estimated that this tax will raise just under three billion euros, according to Reuters from well-informed sources.

The right-wing Italian government has repeatedly criticized banks for not passing on the higher cost of money to savers, but it only took action after the latest series of record profits reported by banks at the end of July and early August.

All Italian banks have achieved much better results than expected and have raised profit estimates thanks to the rise in interest rates. Leading Italian bank Intesa Sanpaolo announced at the end of last month that it expects to achieve profits above 13.5 billion euros from its net interest margin this year.

UniCredit has also improved its financial guidance for this year and now expects to achieve net income greater than 21.5 billion euros and net profit above 7.25 billion euros this year.

– “One only needs to look at the banks’ profits in the first half of the year to understand that we are not talking about millions, but billions,” said Deputy Prime Minister Matteo Salvini at a press conference in Rome late on Monday. “If it is (true that) the burden of higher interest rates has doubled for households and businesses, what current account holders receive certainly has not doubled,” Salvini noted, adding that there is a significant gap between the rates applied to loans and deposits.