The European Central Bank (ECB) is reportedly planning to write a letter of complaint to the Italian government regarding a surprise decision last week to impose a 40% windfall tax on extra profits. According to Corriere della Sera, the ECB was not informed about Italy's plans and will express its doubts about the tax in the letter to Giorgia Meloni's government.
Although the ECB does not have the authority to interfere in domestic fiscal decisions, sending a letter of complaint is expected to provoke protests from the Italian government. The Rome government has previously criticized the central bank over its interest rate hikes, and this action is likely to intensify tensions between Rome and Frankfurt.
Italy's announcement of the windfall tax on August 7 took investors by surprise and resulted in domestic banks losing $10 billion in market value before recovering. However, Italy is not the only country to face criticism for imposing such taxes on banks. The ECB also expressed concerns when Spain and Lithuania introduced similar levies.
In response to the Corriere report, the ECB stated that it received an official consultation request from Italy and will publish its opinion at a later date. The ECB's complaint about the bank tax aligns with the overall sentiment of investors and markets, who have expressed anger over the government's unexpected move.
Following the initial announcement, the Italian government partially reversed its decision and stated that the tax would be capped at 0.1% of lenders' assets. Italy has projected to generate up to €3 billion ($3.3 billion) from this tax, according to Bloomberg's report on Thursday. The outcome of the ECB's complaint and the ongoing controversy surrounding the bank tax remain uncertain.