By Giuseppe Fonte and Gavin Jones
ROME (Reuters) -Italian banks and insurers face an 11 billion euro ($12.90 billion) tax increase over three years as part of government budget plans for 2026-2028 that will be unveiled in full on Friday, officials said.
The government plans tax cuts and other expansionary measures worth an average of 18 billion euros per year, with the financial sector called upon to contribute a large share of the funding needs.
Rome is also considering hiking to 300,000 euros from 200,000 euros a “flat tax” applied on income earned abroad by wealthy individuals who transfer their tax residence to Italy, one official said.
State coffers will garner roughly 4.4 billion euros from the financial sector in 2026 and more than 11 billion over the full three-year period through 2028, a draft budget published on Thursday showed.
COALITION PARTIES OVERCOME DIVISIONS OVER BANK TAXATION
“This is no expropriation. Instead of 50 billion euros in profits, banks will only make 45 billion this year,” said Deputy Prime Minister Matteo Salvini, leader of the co-ruling League party which has pushed strongly for higher taxation on lenders.
The issue has triggered tensions between the government and financial lobbies, as well as divisions within Prime Minister Giorgia Meloni’s rightist coalition.
These differences were overcome at a coalition meeting late on Thursday, the Forza Italia party said in a statement.
The party said Rome would cut to 27.5% from the current 40% a tax banks must pay in order to unlock some 6.2 billion euros in reserves which they had set aside as part of an opt-out clause from a contested 2023 windfall tax.
If banks distribute these reserves, with a 26% tax rate on dividends the overall tax take could be roughly 3 billion euros, sources previously said.
“These will be voluntary choices, without any imposition on banking and insurance institutions,” Forza Italia said, adding that banks and insurers would also contribute in other ways to state finances.
Critics accuse the government of sending conflicting signals, first criticising the banks for huge profits passed on to shareholders, and then encouraging them to pay out even more dividends.
CORPORATE TAX MAY RISE
Other measures being discussed include higher corporate IRAP tax bands and restrictions on the ways financial firms use past losses to lower their tax bills, another official said.
Italy’s banking lobby ABI said earlier this week lenders would agree to support public finances through an extension of a measure imposed by the government last year entailing a multi-year freeze of tax credits, known as deferred tax assets (DTAs), that lenders can tap to boost profits.
The DTA freeze provides short-term liquidity to the government by temporarily boosting tax revenues. The draft budget, however, said Rome was moving to adopt permanent instead of one-off measures.
($1 = 0.8529 euros)
(Reporting by Giuseppe Fonte; Editing by Jamie Freed)
