Intesa Sanpaolo CEO Carlo Messina has warned that measures targeting banks in the government's budget bill may be unconstitutional, raising the prospect of legal action to defend the principle of tax fairness. Banks were already hit last year by an additional levy on profits.

Messina entered the Senate knowing how to make his voice heard before lawmakers on the parliamentary commission investigating the banking system. From Dublin, Prime Minister Giorgia Meloni listened and responded, defending the overall framework of the budget bill.

“Clearly, I would have been happier if we could have achieved the same result through an agreement,” she said. “We all recognize the current situation and the difficulties many people are facing. We are trying to help each other.”

Still recovering from an injury sustained while playing tennis, Messina spoke off the cuff and pulled no punches. The hearing was supposed to focus solely on an update on the ongoing consolidation of Italy's banking sector, but current events quickly took center stage.

“When financial legislation is being drafted, I believe it is very important not to remain confined to a laboratory,” Messina said. “What is being proposed is not consistent with the Constitution.”

The Intesa Sanpaolo Chief took aim at the new levy on the financial sector, which follows last year's agreement, to which he had personally committed, putting his reputation on the line with international investors. The new measures, he argued, “will inevitably lead to confrontations that could ultimately end up before the Constitutional Court. There is no pot of money here to be taken from the so-called bad bankers.”

Messina noted that Italian banks already face “the highest tax rate in Europe” and defended Intesa Sanpaolo's decision to keep most of its business in Italy, even though this exposes the bank to a heavier tax burden. “There is a limit to everything,” he said.

To raise €5 billion in revenue, he suggested, the government could simply have increased the corporate income tax rate for companies reporting annual profits of more than €500 million. “It is not a complicated measure. Why do they always decide to target the same people?” he asked, suggesting that the government had opted for an “electoral” budget designed to “recover one percentage point in the polls after losing 10.”

The tax issue was not the only grievance Messina brought to Rome. Within minutes, he launched another attack, this time on the Superbonus tax credits.

“Extending the ecobonus tax credits over 10 years is a South American-style approach to debt management toward creditors,” he said. “Under ECB rules, we risk triggering classification problems. Is it possible that this provision was never discussed beforehand to find alternative liquidity solutions?” the Intesa Sanpaolo CEO asked.

Meloni rejected the criticism. Government sources described the decision concerning Superbonus tax credits as “a specific political choice.” The prime minister also stood by the broader approach taken in the budget: “There are businesses that have performed well in recent years, partly thanks to government measures and the stability Italy has provided.”

Messina acknowledged the government's contribution to economic stability, making that point several times during his testimony. Nevertheless, he stressed that the banking industry is “the largest investor in Italian government bonds and, after the Bank of Italy and the ECB, the state's largest creditor.” Italian banks hold approximately €600 billion in government securities.

On that portfolio, he said, “we are recording significant losses,” with unrealized losses exceeding the benefits banks have received from public guarantees on loans.

The Bank of Italy also raised concerns about the burden of public debt, which, it suggested, is weighing on the country's growth prospects. Andrea Brandolini, Head of the Economics and Statistics Department at the Bank of Italy, was unequivocal in a separate parliamentary hearing.

“An increase in the deficit through discretionary measures, even if temporary, comes at a cost, particularly for an economy with high public debt and in an environment of elevated interest rates,” he said.

According to the Bank of Italy's estimates, the budget measures will increase households' disposable income, albeit modestly, with slightly greater benefits for lower- and middle-income families.

Regulatory fragmentation, however, remains a major obstacle to coherent economic development. The bill currently under discussion, the central bank warned, “increases the complexity of the personal income tax system,” by “reducing the taxable base for IRPEF and increasing the number of tax brackets,” while introducing new differentiated tax regimes.

As for the funding of the budget measures, Brandolini confirmed that the burden of financing the package falls primarily on the financial sector. “The increase in taxation on banks and insurance companies represents the largest discretionary source of funding in the bill,” he said.

— © ALL RIGHTS RESERVED