The Country Imposing a 'Hoengjae Tax' on Commercial Banks

Meloni, Italian Prime Minister
"Decision responsibility is mine... will do it again"

Giorgia Meloni, the Prime Minister of Italy, took responsibility for the decision to impose a temporary windfall tax on commercial banks this year (a high tax on banks that earn profits from high interest rates) and said she could do it again.

On the 14th (local time), in a joint interview with three major Italian newspapers (including Corriere della Sera), she spoke about the plan to impose a windfall tax on banks amounting to 40% of their "excess profits."

Prime Minister Meloni said, "I have the utmost respect for the banking system and have no intention of punishing banks, but there was an imbalance. Banks quickly raised mortgage interest rates but did not increase deposit rates, causing a distortion."

She added, "I will do it again because I believe it is the right thing to do. I am well aware that this is a sensitive issue. It is entirely my responsibility."

[Image source=Yonhap News]

The Italian government approved a special law at a cabinet meeting on the 7th to temporarily impose a 40% tax this year on domestic banks that made large profits from high interest rates. The windfall tax revenue will be used to help households and businesses suffering from high interest rates. This bill must pass through parliament within 60 days to be implemented.

According to Bloomberg News, the 40% windfall tax will be levied based on the greater amount between the excess of 5% of the increase in net interest income from 2021 to last year or the excess of 10% of the increase in net interest income from 2021 to this year.

The sudden announcement caused a shock in the financial markets, with major Italian bank stocks plunging on the 8th. As the impact spread to other major European banks, the Italian government took steps to mitigate the situation, including setting a cap on the windfall tax.

Criticism arose that the measure was hasty, leading to a decline in trust in the Italian government. Prime Minister Meloni did not attend the cabinet meeting at the time, citing vacation. Deputy Prime Minister and Minister of Infrastructure and Transport Matteo Salvini held a press conference after the cabinet meeting to explain the purpose of the bank windfall tax.

This led to accusations that Prime Minister Meloni was shifting responsibility to the Deputy Prime Minister. Ultimately, during a joint interview with three major newspapers from her vacation spot in Puglia, southern Italy, she stated that the bank windfall tax was her idea and that she takes full responsibility for it.

The Italian government also imposed a temporary windfall tax on major energy companies that made large profits amid high oil prices during former Prime Minister Mario Draghi's administration.

This content was produced with the assistance of AI translation services.