Italy eyes windfall tax mirroring Nigeria’s approach to banking sector
The Italian government, led by Prime Minister Giorgia Meloni, intends to impose new windfall taxes on companies with extraordinary profits in order to address the country's growing budget deficit, according to the Finance Times.This decision reflects Nigeria's windfall tax on banks, which was announced in early 2024 following a significant increase in financial sector profits between 2023 and 2024.
Both countries are focussing on sectors that have unexpectedly profited due to external market conditions, with Italy attempting to impose broader fiscal contributions on industries that have benefited from geopolitical crises, such as defence firms.
Italy's Finance Minister Giancarlo Giorgetti confirmed on Thursday that the upcoming budget would require "sacrifices from everyone," but did not specify whether this would mean higher tax rates or new levies.
Giorgetti stated that the government intends to avoid a repeat of last year's attempt to levy a windfall tax on banks, which caused market volatility and had to be reduced.
However, he emphasised that all sectors, not just banks, would be expected to contribute to the country's financial stability.
"There will be a general call for everyone to contribute, including banks.
"We're all part of a country that has been called to put its accounts in order . . . and everyone must contribute," according to Giorgetti.
While last year's windfall tax was primarily aimed at banks, the Italian government is now expanding its scope to include defence companies that have benefited from rising global conflict.
Giorgetti noted that the war in Ukraine and other geopolitical tensions have resulted in exceptional growth for industries related to global defence production.
"Paradoxically, today, one could say that with all these wars, companies that produce weapons are doing particularly well," Giorgetti said, implying a possible tax on defence firms like Leonardo, the state-owned Italian aerospace and defence company.
Italy's decision to target windfall profits mirrors Nigeria's actions, which included a windfall tax on banks in early 2024.
The Nigerian government imposed this levy after banks reported significant profits in 2023 and 2024, primarily due to gains from the Central Bank of Nigeria's foreign exchange reforms.
The revaluation of the naira provided banks with significant financial benefits, prompting the government to claim a portion of these unexpected earnings.
Nigeria's Finance Minister, Wale Edun, explained that the windfall tax was necessary to ensure that the extraordinary gains in the banking sector contributed to the country's fiscal health, especially as oil revenues declined and fiscal pressures increased.
Edun clarified: "The financial sector has reaped significant benefits from currency reforms, and it is only fair that in a time of national need, such profits contribute to our shared future."
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