One-time 40% Tax on Net Interest Income
"Massive Profits... Profit Redistribution Justified"
Financial Sector Shocked "Negative Market Impact"
The Italian government announced that it will impose a so-called 'windfall tax' on domestic banks that have recorded unprecedented profits due to high interest rates.
On the 9th (local time), according to BBC and others, the Italian government led by far-right Prime Minister Giorgia Meloni decided to impose a one-time 40% tax on banks' net interest income resulting from the rise in interest rates. This is due to the record profits banks have made from the official rate hikes.
The bank windfall tax must be passed by the parliament within the next 60 days to be implemented. Deputy Prime Minister and Minister of Infrastructure and Transport Matteo Salvini said, "We are talking about an industry making billions of euros in profits without lifting a finger," adding, "It is economically and socially justified to redistribute some of these gains."
The Italian government expects to collect 2 billion euros (approximately 2.8885 trillion won) from the bank windfall tax. The additional tax revenue will be used as support funds for households and businesses suffering from high interest rates.
However, the banking sector pointed out that the Italian government's decision could have a negative impact on the financial industry. Citi analyst Azura Guelpi said, "We view this windfall tax as quite negative for banks, as it could adversely affect not only stock prices but also capital and profits."
In fact, after the announcement of the bill, confusion continued as bank stocks plummeted, prompting the Italian government to take a step back by setting a cap on the amount of the windfall tax. This means that the tax will not be indiscriminately imposed on all bank earnings but only on a certain portion of net interest income.
Meanwhile, Hungary and Spain imposed windfall taxes on banks before Italy, and Lithuania is also pushing to impose a windfall tax on banks to finance defense spending.
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