Italian mega-tax would be game-changer

September 13, 2011

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

An Italian mega-tax would be a game-changer. A one-off wealth tax of 400 billion euros, as proposed by the former UniCredit boss, Alessandro Profumo, would solve Italy’s debt problem, thus helping reverse the euro crisis in general. Italians are so wealthy, they could afford it. They certainly have no business asking for help from the Germans, who are actually poorer. But before such an idea has a hope of being implemented, Silvio Berlusconi would first need to be turfed out.

Italian entrepreneurs, including the head of Confindustria, the business lobby, have reacted surprisingly well to Profumo’s idea. Part of the reason is that every week Italians are effectively suffering a wealth tax as a result of plunging domestic stock and bond markets. The latest austerity programme, which would balance budgets in 2013, hasn’t stopped the rot. Even media reports that Italy was cosying up to China in the hope of getting it to buy bonds hasn’t helped. Yields rose again on Sept. 13 after a poor bond auction.

So getting the agony over with has some appeal to Italy’s wealthy. The 400 billion euros that Profumo proposes would cut national debt from 120 percent of GDP to below 100 percent. That would change market psychology. Equity and bond prices might rebound -– meaning that investors might gain more on the market swings than they lost on the tax roundabout.

What’s more, Italians are frankly quite rich enough to bail out their own government. The latest Bank of Italy data shows that net wealth was 8.6 trillion euros or 566 percent of GDP in 2009 –- more than Germany’s 6.1 trillion euros (or 246 percent of GDP) in 2008. Even if a wealth tax was focused on the richest people, a one-off tax of 10 percent, collected over a few years, should do the trick.

Profumo hasn’t just pushed the tax idea; he’s offered to enter politics to implement it as part of a coalition government. Sadly, that can only happen if Berlusconi quits and, despite all the judicial scandals and economic mismanagement, he is still clinging onto power.


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It would reduce the debt and calm things down – for now. If you have a public sector that drains money from the system and it is left unchanged then it is only a problem postponed. Italy, Greece, Portugal and Ireland still have too large and vastly overpaid public sectors. That needs to change and only then will there be the confidence to lend them money.

Posted by pavlaki | Report as abusive

Yes,Italians are rich because they are savers and don’t pay all taxes.Most of the wealth,the big one,is abroad,in very secretive countries and banks,or in ghost companies.Profumo knows very well this,so he’s already a typical Italian politician:snake oil seller. He lost billions of Euros in foreign operations of Unicredit: Austria,Germany,Poland. Nobody trust in him. Change Berlusconi with Profumo is like change a snake with another.
No,thanks.We don’t need more illusions.We had enough.

Posted by Stephanenko | Report as abusive

A 2% wealth tax on the persons, families,corporations, trusts, foundations with net worth over $10 million is exactly what ALL these countries need, especially the USA.

Let’s be honest. The world’s upper 1% keeps nearly 1/3 of their wealth off-shore, untaxed – it is the greatest free ride in modern history. While VAT of 15% or higher is typical in Europe, and in the USA 8% sales tax and higher is quite common, it is obvious that middle and low income workers continually face double taxation and basically support the governments.

If only Obama, Geitner, Schumer or Pelosi would have the guts to say exactly what Profumo is saying.

Posted by Acetracy | Report as abusive