Why the tax on extra profits is a flop

The Meloni Government's silence on the tax on extra profits is embarrassing.
A silence that says a lot about the actual flop of a law that has been corrected countless times, to the point of eliminating the potential revenue with which the State could have filled its coffers.
If in August the announcement of the law on taxing banks' extra profits had served above all to compensate for the voters' despair and discontent over the lack of minimum wage, to date this law has proven to be completely ineffective due to the continuous adjustments made, after the protests of banking credit institutions, including Mediolanum, 30% controlled by the Berlusconi family through Fininvest.
Berlusconi himself, political "shareholders" of Forza Italia, had explicitly expressed their opposition to the tax with Marina Berlusconi having defined the tax on extra profits as "demagogic".
The State has therefore lost the opportunity to replenish its coffers, but how was it possible that this tax on extra profits turned out to be a real flop? Let's dispel any doubts: below is everything you need to know.
read also Banks, what changes with the end of rate rises Why is the tax a flop? Certainly not because there is a lack of extra profits.
If anyone has hypothesized that the bank tax is a flop due to the lack of extra profits, they are wrong: the profits are there.
As Repubblica reports, in the first nine months of 2023 the banking sector in Italy recorded over 16 billion in net profits, approximately +80% compared to the same period of the previous year.
The Fabi union (Autonomous Federation of Italian Banks) has estimated that for the whole of 2023 operating profits will be 43.4 billion for the five groups alone (+70%).
This is – and will be – possible due to the take-off in interest margins: "almost double due to the 10 ECB rate increases".
But then why won't the Italian state coffers see a cent? Why is the extra profits tax a flop? The extra profits tax, on balance, turned out to be a flop because Italian banks found a way to "avoid" it, making use of the possibility of establishing non-distributable capital reserves of 2.5 times the amount due.
According to the reconstruction of Repubblica through sources, it is possible to find the origin of the flop in the work carried out under the radar by the ECB-Bankitalia supervision, in line with the ABI (Italian banking association) and with the Treasury, and with the political side of Forza Italia .
The possibility for banks to make use of the possibility of allocating a value equal to 2.5 times the amount of the tax on extra profits to a non-distributable reserve was introduced with a government amendment prepared by the MEF on 23 September.
Amendment which was approved after the ECB had sent the Treasury a negative opinion on the tax, raising several doubts, including the fear of negative effects on banking assets and the economy, in a phase of credit reduction, due to rate increases and a stagnant economy: Bank of Italy would then have recorded "over 60 billion less in loans to businesses and families in the country in September, -6.2% from a year earlier".
Marina Berlusconi, president of Fininvest, which controls 30% of the Mediolanum bank, had harshly criticized the tax, claiming that it was "demagogic" and that it would damage Italy's attractiveness for investors.
These criticisms have contributed to strengthening the positions of the ECB and the banks.
The dialogue between the Treasury, Via Nazionale and Eurotower in those days was intense: and guaranteeing its fluidity was – according to reliable sources from La Repubblica – Fabio Panetta, outgoing member of the ECB board and governor of Bankitalia in pectore, appreciated by Meloni and close to the Berlusconi family.
Just three months after the blitz decree of 7 August, and one month after its conversion into law, it is now clear that the law will not bring a single euro to the tax authorities.
Already a dozen of the largest institutions in Italy, in their third quarter accounts, have announced that they will not pay the contribution, due in mid-2024, preferring to set up a non-distributable capital reserve of 2.5 times the amount, like Intesa Sanpaolo (828 million), Unicredit (440 million) and again Banco Bpm, Bper, Mediolanum and even publicly controlled banks such as MPS, Mcc and Popolare Bari.
The tax which was intended to bring around 3 billion euros into the state coffers, it turned out to be a mistake and indeed on August 8th alone it caused the banking sector to lose 10 billion on the stock market.
read also Budget Law 2024, all the tax increases: what Meloni doesn't say