Italy Reduces Proposed Gold Tax On Bank Of Italy, After ECB Opinion

by Ulrika Lomas, Tax-News.com, Brussels

29 July 2009

The European Central Bank, in an opinion dated 14 July, asked the Italian government to reconsider a proposed 6% tax, which would mainly fall on Banca d’Italia’s gold reserves. Separately, the government reduced the tax to 1% within the amendments to its “anti-crisis” economic package, announced on 15 July.

In the ECB’s opinion, the proposed tax “needs to be reconsidered to address the concerns expressed ..... relating in particular to central bank independence and the prohibition on monetary financing.”

Firstly, it said that the proposed tax “raises concerns with respect to Banca d’Italia’s institutional and financial independence by allowing for an arbitrary decrease in Banca d’Italia’s resources and by potentially forcing Banca d’Italia to deploy asset management strategies targeting financial risks created by the proposed new tax provisions. In particular, the proposed introduction of the new tax scheme has not been preceded by an assessment of the impact on Banca d’Italia’s financial needs. As a result, Banca d’Italia’s financial position would be weakened.”

Secondly, in that the tax would apply to unrealised capital gains generated from the appreciation of the value of the gold reserves, the ECB said that it would “raise concerns with respect to the prohibition on central bank monetary financing of the public sector to the extent that it foresees profit distributions in expectation of uncertain central bank income potentially realised in the future.”

The “anti crisis” economic package presented by the Italian government in June (and presently passing through parliament) proposed the introduction of the 6% capital gains tax on gold on balance sheets for non-industrial use. The Italian government has, however, in an amendment to the package, now reduced the tax to 1% on the total value of gold held, as a once-only tax in the current fiscal year.

The amendment also stipulates that any capital gains actually realised from the sale of gold in the next three fiscal years will be subject to both national and local corporate income tax.

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