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Tremonti Looks For Flexibility On EU Bank Tax

by Ulrika Lomas,, Brussels

23 June 2010

At the same time as the proposal came under attack from ABI, the association of Italian banks, and Confindustria, the Italian industrial federation, Italy’s Minister of the Economy, Giulio Tremonti, expressed the hope that the proposed European Union (EU) bank tax would be applied flexibly between individual countries.

Tremonti made his comments during a press conference the day after EU leaders had given their go-ahead to the proposed banking levy by each EU country, to build up a contingency fund against future banking collapses. He looked forward to further details on the proposal, but also said that there should be a certain amount of flexibility in the tax.

He said that flexibility was needed in the application of any bank tax that was finally agreed, given that all countries were not the same and have different characteristics, particularly in their banking systems. If possible, he added, the Italian government would want discussions on the tax to proceed on a country-by-country basis.

On the other hand, ABI is against the introduction of such a banking levy, irrespective of its final form and rate. In a memorandum on the proposed tax, it said that Italian banks already suffer an effective tax rate of 44%, amongst the highest in Europe, and that they had been able to ride out the market turbulence better than in other countries. They had not called on the government for public funds.

ABI is convinced that it is necessary to look at the regulation of those activities that caused the financial crisis, rather than place a tax on the whole banking system. Above all, it said, any additional taxes necessary to reduce public fiscal deficits should be separated from policies to regulate financial activities, particularly in those countries, such as Italy, where the banks have continued to support the real economy and have not resorted to government support.

It believes that a bank tax could have a deleterious effect on the banks’ ability to continue to finance economic activity in Italy, particularly as their costs have already risen substantially with the rapid increase in credit risk during the economic crisis. A bank tax would further reduce the system’s resources to support businesses and families through a difficult period.

Finally, Confindustria President, Emma Marcegaglia, is also concerned by the proposal to provide an emergency fund by way of a tax on the banking system. In her opinion, taxes on banks always end up by being passed, through interest rates and commissions, to businesses and savers.

To introduce such a tax now, she added, would be to say that there would definitely be another crisis. Instead of talking of new taxes, Confindustria would prefer a better solution through new regulation and regulators.

TAGS: tax | banking | tobin tax | Italy | regulation | European Union (EU) | Europe

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