Impakter
  • News
    • Culture
      • Art
      • Cinema
      • Entertainment
      • Literature
      • Music
      • Photography
    • Style
      • Architecture
      • Design
      • Fashion
      • Foodscape
      • Lifestyle
    • Society
      • Business
      • Foreign Affairs & Politics
      • Health
      • Tech
      • Science
      • Start-up
    • Impact
      • Environment
      • Eco Life
      • Circular Economy
      • COP26
      • CityLife
        • Copenhagen
        • San Francisco
        • Seattle
        • Sydney
      • Sustainability Series
        • SDGs Series
        • Shape Your Future
        • 2030: Dream or Reality
      • Philanthropy
        • United Nations
        • NGO & Charities
        • Essays
  • Sustainability Index
  • Partners
  • About
    • Team
    • Contributors
    • Global Leaders
    • Write for Impakter
      • Republishing Content
      • Permissions and Copyright
      • Privacy Policy
    • Contact
No Result
View All Result
  • News
    • Culture
      • Art
      • Cinema
      • Entertainment
      • Literature
      • Music
      • Photography
    • Style
      • Architecture
      • Design
      • Fashion
      • Foodscape
      • Lifestyle
    • Society
      • Business
      • Foreign Affairs & Politics
      • Health
      • Tech
      • Science
      • Start-up
    • Impact
      • Environment
      • Eco Life
      • Circular Economy
      • COP26
      • CityLife
        • Copenhagen
        • San Francisco
        • Seattle
        • Sydney
      • Sustainability Series
        • SDGs Series
        • Shape Your Future
        • 2030: Dream or Reality
      • Philanthropy
        • United Nations
        • NGO & Charities
        • Essays
  • Sustainability Index
  • Partners
  • About
    • Team
    • Contributors
    • Global Leaders
    • Write for Impakter
      • Republishing Content
      • Permissions and Copyright
      • Privacy Policy
    • Contact
No Result
View All Result
Impakter
No Result
View All Result
Home Society Business

Taxing the Banks: Doing Away With Excess Profits the Italian Way

From the 40% windfall tax to the 0.1% cap, what is the motive behind Italian Prime Minister Giorgia Meloni's latest fiscal maneuvers? It appears to be a new way to have your cake and eat it too: This is how it works

byElisa Furlan
August 10, 2023
in Business, Politics & Foreign Affairs
Italy windfall tax
Share on FacebookShare on Twitter
Halloween Travel Deals

On August 7, 2023, Italian Prime Minister Giorgia Meloni approved a 40% windfall tax on local banks. 

The following day, Italy’s government, however, appeared to reverse the decision, setting a 0.1% cap on the share banks needed to pay — and that looked like serious backtracking.

Before diving into the reason for this change, let’s look at what the windfall tax is: A surtax imposed by governments on certain businesses based on profits made as a result of something the company wasn’t responsible for. An example of this would be pharmaceutical, fossil fuel and food companies earning bumper profits during the Covid-19 pandemic.

The decision to impose this tax depends on how much that sector has earned in comparison to others. If the government feels that a particular sector is having an above-average profit, then they might decide to set a windfall tax.

The overall goal of this maneuver is to redistribute the excess wealth in one area to aid other sectors, which might have not benefited from the economic growth as much.

What Italy Did: A Double Maneuver, Applying a Surtax and Limiting It With a Cap

What Italian Prime Minister Giorgia Meloni did this week eventually turned out to be a complex, dual maneuver. 

First, she approved a 40% windfall tax on banks in Italy. The decision followed a period of rapid interest rates increase, which had allowed banks to profit off people asking for loans and mortgages. 

The surtax was meant to provide the Italian treasury with extra money to aid mortgage holders and cut taxes. Analysts at Jefferies, an American multinational independent investment bank and financial services company, stated that the 10 biggest banks could pay roughly 4.9 billion euros to the state. 

After the windfall tax was approved, bank shares dropped. Italy’s largest bank, Intesa Sanpaolo, closed Tuesday 8.67% lower. BPER — Intesa Sanpaolo’s mid-sized rival — closed the day 10.9% lower. 

Analysts were quick to say that Italy’s decision to introduce the windfall tax undermined investors confidence, portraying a market totally unprepared for the cut.

Moreover, after the European Central Bank had increased interest rates by 0.25% last week, analysts, fearing recession, had also called for a pause on this rise, thus signaling a change in the investment climate.


Related articles: ExxonMobil Sues EU Over Unprecedented Windfall Tax | Taxing the Rich: 5% Tax Could Lift 2 Billion out of Poverty, Report Shows | Climate Strategies in Banking: How the World’s Largest Banks Address Climate Change

So, the Italian government undoubtedly took note and, in an attempt to regain investors’ trust, on Tuesday evening Italian Economic Minister Giancarlo Giorgetti modified the previous decision introducing a 0.1% cap on the windfall tax.

The 0.1% cap means that banks will not be required to pay more than 0.1% of their total assets, even if this percentage falls below the 40% windfall tax approved earlier.

Apparently, this decision worked. All the major banks — Intesa Sanpaolo, Banco BPM, and UniCredit — closed the day positively. The best performer was Finecobank, with a positive 4%.

Expectations are now that the government, even with the cap in place, will obtain enough money to achieve its original objective of aiding mortgage holders and generally cut taxes to boost economic activity.

The Windfall Tax Abroad

Italy is not the only country to have introduced a windfall tax. In July 2022, Spain’s government imposed a similar, temporary tax on banks to raise 7 billion euros to lower the rising costs of living.

Hungary and the Czech Republic also introduced a similar surtax.

In 2022, Hungary imposed a windfall tax in several sectors, such as banks, energy firms, and insurers. The bill is set to earn the government more than 4 billion euros between 2022 and 2023, effectively aiding the country’s budget deficit.

Other countries, such as the Czech Republic, introduced an even higher windfall tax. In November 2022, the Czech lower parliaments approved a 60% windfall tax on banks and energy firms. Their goal is to raise more than 3 billion euros to aid people struggling to cope with the rising gas and energy prices.

Overall, there is a general European trend of increased windfall taxes. It would be interesting to see how this all plays out in the long term: will the governments really gain enough funds with such maneuvers to meaningfully invest this extra money to aid the public and make a difference?


Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: Italian Prime Minister Giorgia Meloni, February 2022. Featured Photo Credit: Wikimedia Commons

Tags: BankingsurtaxtaxtaxesWindfall Tax
Previous Post

Georgia’s Evolving Geopolitics: Navigating a Strategic Partnership With China

Next Post

The 5 Best Small Electric Cars of 2023

Elisa Furlan

Elisa Furlan

Elisa was born in Rome, Italy, and she is on a mission to discover new ways to live more sustainably. She holds a bachelor’s degree in Communication studies from the University of Roma Tre and is about to start a master’s degree in European studies at the University of Gothenburg. She is passionate about history, philosophy, and politics. She also loves learning languages and can speak Italian and English fluently; she is currently learning Spanish and French. In her free time, she likes watching movies and TV shows as well as reading novels — always with a good cup of coffee in hand.

Related Posts

UK public climate change
Climate Change

UK Government Is Ignoring Public Opinion on Climate Change

September 29, 2023
US Government Shutdown: A Self-Inflicted Punishment Imposed by Politicians
Health

US Government Shutdown: A Self-Inflicted Punishment Imposed by Politicians

September 27, 2023
macron's ecological plan
Climate Change

Macron’s New ‘Ecological Plan’: What to Know

September 26, 2023
Next Post
The 5 Best Small Electric Cars of 2023

The 5 Best Small Electric Cars of 2023

Recent News

What Is ‘Disease X’ and Should We Be Worried?

What Is ‘Disease X’ and Should We Be Worried?

October 2, 2023
Glaciers melting

Why Are Glaciers Important?

October 1, 2023
climate change alcohol

Climate Change May Contribute to Alcohol and Drug Abuse, Study Finds

September 30, 2023

Impakter informs you through the eco news site and empowers your sustainable lifestyle with its eco products marketplace.

Visit here IMPAKTER ECO for your eco products needs.

Registered Office Address

32 Lots Road, London
SW10 0QJ, United Kingdom


IMPAKTER Limited

Company number: 10806931

Impakter is a publication that is identified by the following International Standard Serial Number (ISSN) is the following 2515-9569 (Printed) and 2515-9577 (online – Website).


Office Hours - Monday to Friday

9.30am - 5.00pm CEST


Email

stories [at] impakter.com

Playwire

Advertise on this site.

About Us

  • Team
  • Contributors
  • Privacy Policy
  • Contact
  • Partners

By Audience

  • Lifestyle
  • Green Finance
  • Culture
  • Society
  • Style
  • Impact

Impakter Platforms

  • Media
  • Index

© 2023 IMPAKTER. All rights reserved.

No Result
View All Result
  • News
    • Culture
    • Style
    • Society
    • Impact
  • Sustainability Index
  • About
    • Team
    • Partners
    • Contact
    • Privacy Policy

© 2023 IMPAKTER. All rights reserved.