By Valentina Za and Giuseppe Fonte
ROME/MILAN (Reuters) -Italian banks said on Tuesday they would continue supporting public finances through an extension of a measure imposed by the government last year entailing a multi-year freeze of tax credits that lenders can tap to boost profits.
Rome will approve late on Tuesday the draft budget to be sent to European Union authorities for approval, Prime Minister Giorgia Meloni’s office said in a statement.
The freezing of the tax credits, booked by banks as deferred tax assets (DTAs), is part of a broader set of measures the government is considering to raise between 3 billion and 5 billion euros ($3.5-$5.8 billion) from lenders to help fund its 2026-2028 budget, political sources said.
Italy’s banking index fell 1.6% by 1046 GMT, with the blue-chip index down 1.2%.
Representatives of the banking sector met government officials on Monday, and national lobby ABI said its steering committee had convened later in the day.
“The committee unanimously approved the continuation of multi-year contributions to the state budget under a temporary provision, in line with last year’s agreement,” ABI said in a statement.
The DTA freeze provides short-term liquidity to the government by boosting tax revenues, but does not increase the overall tax burden on banks.
Initially imposed for 2025-2026, the freeze is now expected to be extended to cover 2027-2028, according to the sources.
The government is also considering lowering to 26% or 27.5% from the current 40% the tax to be paid for banks to unlock 6.2 billion euros in reserves they set aside last year under an opt-out clause from a contested 2023 windfall tax, the sources said.
If banks distribute such reserves, with a 26% tax rate on dividends, the overall tax take could be roughly 3 billion euros, the sources said.
Rome is expected to include in the budget a mechanism to push banks to free up the reserves by paying the lower rate.
“The overall impact of the package is limited,” Equita analyst Andrea Lisi wrote in a note. “The measures are damaging for the sector partly because of their retroactive nature.”
Critics accused the government of sending conflicting signals, first criticising the banks for huge profits passed on to shareholders and then encouraging lenders to pay out even more dividends. “It seems to me that there is some confusion at the Treasury,” said Luigi Marattin, head of a small, centrist opposition party.
The impact of the planned measures would be partially offset by government refunds for IRAP regional corporate tax banks paid on dividends from foreign subsidiaries, following a European Union ruling in August, Reuters reported last week.
The reimbursements could cost the state up to 1.5 billion euros.
($1 = 0.8655 euros)
(Editing by Keith Weir and Hugh Lawson)
