Italy Said to Consider Tobin Tax Freeze to Aid Bank Industryby , , and
Levy introduced in March 2013 could be suspended indefinitely
Attempts at a pan-European levy on transactions unsuccessfull
Italian Prime Minister Matteo Renzi is considering the suspension of a levy on financial transactions introduced in Italy three years ago as it seeks to shore up the country’s banking sector, a government official said.
The levy, dubbed Tobin Tax after late U.S. economist James Tobin, might be suspended indefinitely after a cabinet meeting in May, said the official who declined to be named because the discussion on the draft proposal is confidential.
The tax freeze would be part of a package of government measures to stimulate productivity and competitiveness in the euro region’s third-biggest economy, the official said. The country is struggling to accelerate out of a record-long recession.
“This may encourage foreign investors to re-enter the Italian market,” said Luca Rubini, a managing director at Fidentiis Equities in Milan. “Such a measure may restore interest in Italian financial markets, thus attracting more investors and boosting volumes.”
Italy is among 11 countries of the European Union that began talks three years ago on a common imposition of the Tobin Tax. Estonia pulled out last year and Slovenia and Belgium in the last few months raised concerns about the viability of the plan.
A project such as this, where a group of EU countries decide to go it alone without the support of all 28 nations, needs the backing of at least nine members under the bloc’s rules. A decision by Italy to pull out could wreck the project.
Suspending the tax would give some “oxygen” to investors in Italy and would be justified given that too few countries appear to be willing to levy it, the official said. Renzi has yet to decide on a suspension, he added.
The tax, introduced in March 2013 under then-Prime Minister Mario Monti’s government, currently adds a rate of 0.2 percent on trades of financial instruments. The levy’s implementation was opposed without success by the country’s lenders through the banking lobby ABI.
Revenue from the Tobin Tax rose almost 20 percent last year to 480 million euros ($542 million), according to Finance Ministry data.
The suspension would be part of Renzi’s efforts to revive the country’s banking industry, plagued by bad loans and low profitability. Earlier this month, the government backed the creation of a 4 billion-euro to 6 billion-euro bank rescue fund, named Atlante, to help bank capital increases and sales of soured debt.