Italy's banks should contribute 5 billion euros to 2026 budget, League party says

ROME (Reuters) -Italy's domestic banks should contribute some 5 billion euros ($5.85 billion) to the upcoming 2026 budget, the ruling coalition League party said in a statement.

The proposal was based on windfall tax measures previously implemented in various European countries, said the League, which is headed by Deputy Prime Minister Matteo Salvini and includes Economy Minister Giancarlo Giorgetti amongst its ranks.

"The objective is to intervene on the excess profits of the major credit institutions," the League said.

A source close to the matter told Reuters the League was proposing to adopt a Spanish-style banking levy that would hit net interest income and commissions with tax bands ranging between 1% and 7%.

Giorgetti said last week that the Italian banking sector had made "stratospheric profits" over the last five years and must make a contribution to state finances.

However, the League proposal looks certain to face resistance from one of its government allies, the Forza Italia party, which has made clear its opposition to windfall taxes that target the banking sector.

"Banks can and must do their duty, but 'extra profit' is something that doesn't exist," said Forza Italia leader Antonio Tajani, who also serves as a deputy prime minister and foreign minister in the government.

"Taxing extra profits and continuing to threaten the banks means putting our entire financial system in difficulty, frightening the markets, making investors flee," he said on Saturday.

Italy attempted to impose a 40% windfall tax on banks in 2023, but the measure sparked a major selloff in Italian banking stocks, forcing the government to radically soften the plan.

A package of government-imposed measures at the end of 2024 raised some 4 billion euros from banks to help finance this year's budget.

Other proposals being discussed within the coalition include a tightening of the terms that allow banks to use tax credits known as "deferred tax assets" to lower their tax bill, following the approach taken last year, or taxing share buyback programmes aimed at rewarding shareholders, the source added.

($1 = 0.8546 euros)

(Reporting by Giuseppe Fonte, Editing by Crispian Balmer)