Tax on banks’ extra profits: who is risking defamation and what is happening now?

In the wake of the stock market crash (about $9 billion burned in a matter of hours), the government softened the pill on Tuesday evening, stating that the tax on extra profits, which was surprisingly announced after the August 7 cabinet meeting, would be maximum. contribution ceiling that cannot exceed 0.1% of the total assets of credit institutions. This is a move that, in theory, weakens the effects of the measure and should also reduce the revenue that experts estimate, which has been estimated at two to three billion euros.

What is extra income tax?

But what are we talking about? The tax on extra profits simply hits the profits that the banking system has begun to accumulate since the ECB’s rate hikes to keep inflation in check. If mortgage and loan interest rates increased too much, the rates customers paid to the amounts deposited in current accounts did not show the same increase. According to experts, the new tax should only be applied to profits in 2023. Despite the ongoing adjustment and the tax ceiling, the measure will still include a payment for most credit institutions and income for the government coffers. In addition to the risks for customers.

0.1% ceiling

The Ministry of Economy and Finance (MEF) announced a partial return, the effects of which have not yet been evaluated. The note states that the measure “was born following the rules already in place in Europe on extra banking margins”. In order to maintain the stability of banking institutions, it was underlined that “it provides a maximum ceiling for contribution not exceeding 0.1% of total assets”. The note also read, “With a special note from the Bank of Italy, banking institutes that have already adjusted their funding rates as recommended on February 15, a recommendation later recalled by Minister Giorgetti on the occasion of the ABI assembly on July 5, as a result of the rule approved yesterday in the CDM. Will it have significant effects?

In the said communication, the Bank of Italy warned credit institutions not to increase the costs of current accounts for customers, as “the rise in official interest rates initiated by the European Central Bank last July” will have “positive effects” overall. “The profitability of relationships between banks and their customers, which can potentially offset the cost increase caused by inflation”.

Extra profits of banks

A suggestion that has not always been implemented. On the contrary. Collection rates have remained particularly low over the past year, as Unimpresa explains. Specifically, “the liquidity ratios parked in current accounts rose several decimal places to 0.32% last June, from 0.02% in June 2022”. “This money, which banks actually bought at very low prices from their customers, is then increasingly sold in the form of loans to both companies and households,” now averaging 4.25 percent. This creates a significant margin that the government plans to seize, as is easy to predict.

Risks for customers

But there is a problem. As many experts warn, banks may actually decide to lower the costs of new client tax, for example by increasing commissions or the cost of new loans. As economist Andrea Di Stefano explained to Ansa, a similar injunction was taken in Spain last year. “With a margin that will weigh in”, the economist warns, “especially for consumers”, “the Spanish government had included commissions in the tax base of the tax”, “there are no commissions in the current draft” and therefore “objective for citizens, customers, consumers” is a risk, banks can compensate for the loss of profits from this tax by at least increasing commissions, which we know is a very important hidden tax in the Italian banking system.” and increasing the cost of new mortgages.

Who will benefit from the income?

So customers and citizens were able to pay. However, it is not yet clear what the real impact of the measure will be after the partial rollback announced by the Ministry of Economy with the 0.1% ceiling on the tax on Tuesday evening. Finally, the government will have to clarify who will benefit from the revenue. At the press conference, Infrastructure Minister Matteo Salvini said “the revenue will go into two items: initial home mortgage assistance and tax breaks received at different times from existing ones”. But what mortgages are we talking about? Isee, which does not exceed 40 thousand euros for those under 35 years old? Or general assistance to those who have difficulty in taking out a variable rate mortgage and increasing the installment? In the latter case, an ethical (and political) problem arises: why help those who choose a riskier (but more convenient) financial solution than a fixed rate? Moreover, if there is a risk that operating costs will fall on other customers.

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Source: Today IT