The Italian government is changing its project to impose taxes on banks and companies

The Italian government changed its controversial project to impose a tax on extraordinary profits of banks, after numerous criticism, especially from the European Central Bank, Italian news agencies reported.

Banks will be able to choose between paying the tax or increasing their non-distributable reserves – reserves that cannot be paid as dividends – by an amount equivalent to two and a half times the tax, according to the proposed amendment.

The change in text must be approved by Parliament and may be subject to further changes.

The far-right government led by Giorgia Meloni announced in August that it would apply a single rate of 40% to banks’ “excessive profits” resulting from higher interest rates decided by the European Central Bank since July last year.

The decision led to Italian bank stocks recording sharp declines, and two days after its announcement, the government clarified that the new tax on banks “stipulates a maximum contribution limit that cannot exceed 0.1% of total assets.” A level much lower than initial estimates.

On the thirteenth of this month, the European Central Bank warned of the effects that the tax may impose, especially on institutions’ capital levels or the composition of provisions, and the risk of further fragmentation of the European financial system.