Italy’s windfall tax on banks can be improved on, economy minister says

By Giselda Vagnoni and Giancarlo Navach

CERNOBBIO, Italy (Reuters) -Italy’s new tax on bank profits can be improved on, economy minister Giancarlo Giorgetti said on Sunday, denying that the new levy was unjust.

“It may be that the tax is inappropriate, it can certainly be improved upon … but I do not accept that it is considered an unfair tax,” Giorgetti said at The European House – Ambrosetti economic forum.

Last month, Italy’s government dealt a surprise blow to the country’s banks by imposing a one-off 40% tax on lenders’ profits resulting from higher interest rates, after reprimanding lenders for failing to reward deposits.

Bank shares tumbled before the economy ministry clarified that the new tax would amount to no more than 0.1% of their total assets.

About 33% of the attendees polled by the forum organizers were “very negative” on the measure, and two-thirds were overall negative on it.

Giorgetti, a member of the League party, countered this view saying that it was a fair tax and the state had given a lot in the way of guarantees to the banking system.

However, the minister apologised for the clumsy handling of the draft proposal, announced as a surprise at a news conference late on a Monday in August by the deputy prime minister.

“I can assure you that I take full responsibility for communication errors, but in the end the final version will be something that everyone can appreciate,” Giorgetti said.

The co-ruling Forza Italia party wants to exclude returns ongovernment bonds from the new levy, its leader Antonio Tajani confirmed in Cernobbio, so that it does not affect the future auctions of government bonds.

Forza Italia is also seeking an exemption for small banksand wants a guarantee the levy will not be extended beyond 2023.

Giorgetti did not comment on his government ally’s proposals on the bank tax.

He also gave no indications as to when Monte dei Paschi di Siena bank was going to be privatised, despite Tajani’s call for swift action.

“We will solve (it) calmly but without letting anyone dictate the timings as far as the banking system is concerned,” Giorgetti said.

(Reporting by Giselda Vagnoni and Giancarlo Navach; Additional reporting by Giancarlo Navach; Editing by Hugh Lawson and David Evans)