Extraordinary tax on banks, here are the knots that will come home to roost
A surtax is a choice that has solid foundations both from an economic and a legal point of view, but the move and timing of that of the government on the banks raises many perplexities and just as many questions. Giuseppe Liturri's analysis
On Thursday 10 August, with the publication of the decree law in the Official Gazette, the first phase of the extraordinary tax on banks affair was closed. The fact that the technical report – a more unique than rare case, albeit admissible – does not even make a forecast ("out of prudence") on the proceeds of this tax only increases the doubts that had arisen regarding the bungled ways in which was announced on Monday evening . We would like to be wrong, but it has all the flavor of a good August outing to animate chats under the umbrella or in the huts and capture the media attention that the opposition was gaining by pressing the government on the minimum wage and basic income.
In short, something similar to the famous "a brigante, brigante e mezzo".
But you can't play with fire. Especially when it comes to listed companies that manage the savings and payments of Italians, it is a method that does not pay, rather it creates damage.
Announcing such a tax at a press conference on Monday evening, without having it published in the Official Gazette the same evening – as Giuliano Amato did when in July 1992 he withdrew six per thousand from the current accounts of Italians – could only sow uncertainty among investors who wondered about what could have been the tax burden that will reduce profits and therefore the stock market value of the shares of the banks involved. Legal certainty is everything in these cases. Instead, nothing, apart from the press release from the Council of Ministers which ended at 20:31 on Monday. And so throughout the day on Tuesday the shares of the banks recorded heavy declines which led the sector index to retreat by about 6%, losing 900 points. When the MEF press release arrived on Tuesday at 19:55 which added the essential piece, of which there was no trace just 24 hours earlier, consisting of the ceiling on the amount that could be burdened on each individual bank (0.1 % of assets), yesterday the calculations began to be more feasible and defined and what seemed to be the muscular display of Robin Hood who stole from the rich to give to the poor has been reduced, with non-catastrophic impacts on bank accounts. The sector index recovered on Friday evening by slightly more than half of the decline recorded on Monday.
But by now the omelette has been made and, as expected, throughout the week the Financial Times , Reuters and Bloomberg raged talking about "confusion", "backtracking", "loss of credibility". Even proposing government crisis scenarios. They were waiting for nothing else and the government clumsily offered them their side. We have carried out a simulation on the accounts of Credem, one of the most solid and profitable banks in Europe, with a substantially national perimeter that is easier to analyze (although it is partially misleading to analyze the data from the consolidated financial statements), and we have estimated that, if the second half of 2023 if the interest margin were equal to that of the first, the surcharge would amount to 216 million. But with the roof, pulled like a rabbit out of a hat by Minister Giancarlo Giorgetti, it drops to around 65 million. Just under half of the taxes levied on the group in 2022 and a fraction of the 299 million net profit in the first half of 2023. Banca Generali, to give another example, declared an impact of just under 20 million.
Yet there were all the premises to do well. A surtax is a choice that has solid foundations both from an economic and a legal point of view. Furthermore, it is an objective fact that the banks have benefited, starting from the second half of 2022, from an exceptional increase in the interest margin because they were able to immediately adjust the rates of their loans and niche in increasing the rates paid on deposits. The result is in the interim announcements of recent days, in which the net profits of the main Italian banks increased by 40% to 100% compared to the first half of 2022.
The government has correctly chosen to make the comparison between 2023 and 2021 (it is unlikely that the comparison between 2022 and 2021, even possible, will return higher values) thus overcoming the defect of the retroactivity of the tax, while in any case violating article 4 of the Statute of the taxpayer. In this way one of the defects of the "extraordinary contribution" to be paid by companies in the energy sector launched by the Draghi government in March 2022 was overcome, with disastrous revenue compared to forecasts, calculated instead on previous periods. The choice of the interest margin (data shown in the financial statements and not to be calculated ex novo) as the basis for the calculation was also positive, instead of the improbable use of VAT data made in 2022.
However, all the objections posed by the Constitutional Court in 2015 remain to be overcome, judging the Robin Hood Tax introduced by the Berlusconi government in 2008. The rejection of which was above all determined by the decision to make it permanent, made by the Monti government. That sentence teaches us that in the abstract it is possible to derogate from the principle of ability to pay and equality and institute a tax, albeit temporary, which acts on excess profits (so-called "undeserved" gains), but there must be an adequate motivation, attributable to exceptional situations of an exogenous nature (such as a war) and the surcharge must be designed in a coherent manner with respect to the purpose. Here, however, we are dealing with the effects of a normal phenomenon, such as rates that rise and fall (remember the negative rates?) in relation to the economic situation. According to the Court, "every diversification of the tax system, by economic area or by type of taxpayer, must be supported by adequate justifications, in the absence of which the differentiation degenerates into arbitrary discrimination ". Furthermore, it remains to be shown that the excess margin of 2023 over 2021 is a suitable measure of excess profit. In fact, where is it written that 2021 was a year of "normal" profitability, as requested by the Court? In fact, we recall that the banks paid to deposit their liquidity with the ECB or invest in short-term government bonds and have never applied negative rates on deposits from savers. Furthermore, the text filed by the government does not address another of the grounds for censure of that ruling, namely the presence of adequate control mechanisms to prevent banks from shifting the greater tax burden downstream to account holders. The Robin Hood Tax had them and the Court ruled them ineffective. In this case, there is not even a shadow of it in the decree law. What will the Court say?
These are knots that will come home to roost. In the meantime, you won't be bored under the umbrella.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/imposta-straordinaria-sulle-banche-ecco-i-nodi-che-verranno-al-pettine/ on Sat, 12 Aug 2023 17:58:22 +0000.