Italian Banks Hurting As Monti Rules On Tax Break

by Ulrika Lomas, Tax-News.com, Brussels

31 October 2001

Following a ruling by the European Union Competition Commissioner Mario Monti, it was revealed that many Italian banks will be forced to repay hundreds of millions of euros to the government.

Mr Monti announced in September that he would be launching 'formal investigations' into tax provisions in EU member countries which he considered constituted illegal state aid. Although Italy was not on the Commissioner's official 'hit list', it was warned at the time to come into line with EU policy.

However, Mr Monti has now formally stated that fiscal incentives given between 1998 and 2000 to encourage banking mergers had, in the view of the Commission, distorted competition, and ordered the affected banks to repay the money.

Several banks, most notably UniCredito Italiano, were ahead of Mr Monti. Anticipating that it would have to renounce the tax breaks, the country's largest bank recently revealed that it had put aside E198 million ($179 million) last year, and another E49 million during the first half of this year.

Other banks, however, were not so far-sighted. According to a Financial Times report this week, Intesa-BCI, which received tax breaks worth E250 million last year alone failed to put any money aside, leaving it in somewhat straitened circumstances.

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