This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and services. If one wants free enterprise and reap its benefits one has to allow high profits for companies and see if competition takes care of the "problem".
Italy approves 40% windfall tax on banks for 2023 as profits soar
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Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#22Can we have energy companies next? Pocketing record profits during this situation is just disgusting.
If there are no windfall profits during boom times, are you equally onboard with subsidies during lean times? If the banks are doing something predatory then that behavior should be stopped. Not being able to define it and then seizing an arbitrary portion of the profits isn’t going to stop it in the future. Hell, since profit is after expense, they can increase CEO salaries to reduce it and be taxed less! Plus if th…
In the UK (but Italy as well), banks are routinely bailed out. Government takes over, absorbs liabilities, sells back to the market an unburdened company ready to make new profits (and new debts).
Utilities are similarly bailed out, because what are you going to do, leave people without water and electricity?
If we have risk floors, we should also have profit ceilings.
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#23I dislike banks as much as anyone else. But does it bother anyone else to see rules changed around? Wouldn't it be a better approach to tell people/corporations how they're gonna be taxed?
It does not bother me. But I think there should be a min/max for how much wealth a person has. No one suffers from taxing windfall profits. Windfall , by definition, being unexpectedly high profits.
> No one suffers from taxing windfall profits. Windfall , by definition, being unexpectedly high profits.
1. This is objectively false. Shareholders of the bank suffer, because they get less profits. This may not be a crowd that solicits a lot of sympathy, but they still exist.
2. How do you feel about VCs and startups? Their entire business model is investing in 100 companies, knowing that 99 will fail but 1 will make astronomical returns. How would this work if there were windfall taxes?
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#24This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and s…
> see if competition takes care of the "problem".
We have seen: for industries with big capital requirements or heavy regulatory frameworks (enacted for everyone's safety), it just doesn't.
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#25Windfall taxes and bailouts aren't the policies that create a healthy banking sector. Instead they should worry about crafting better regulations and having competition for where people's savings go.
What would you say is an exemplar of a healthy banking sector?
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#26This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and s…
fully agreed. if you look at e.g. California, those European diseases might start to infect the USA too...
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#27This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and s…
And that is why so many british businesses incorporate in the virgin islands or cayman.
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#28This is an old European disease. Corporate profits are often seen as an adverse result; of consumers being taken advantage of unfairly. Taxing excess profits beyond what are already high tax rates is popular amongst voters (e.g. see poll results in the UK, 2022). However, this lowers the appeal for new entrants to enter these markets to compete for these excess profits through better and more efficient products and s…
Unfortunately the old American disease of not ensuring competition and instead passing regulation ensuring monopolies stay in power means the "problem" is not actual solved, and is in fact made worse.
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#29Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then again, I'm pretty sure it's going to be misused by the government. I would much rather see regulation forcing banks to raise interest r…
> I would much rather see regulation forcing banks to raise interest rate on deposits Regulation that increases competition would be even better. It seems like that would be the underlying problem.
I am not sure myself. The past two decades have shown that banking is a sector which needs to be tightly regulated and bankers can never be trusted to not do utterly stupid things if there is even the slighest hint of profits. Honestly, I would be fine with the banking sector being nationalised at this point at least for the retail part. We are already bailing out banks when they fail so let's be coherent.
It's entirely technologically possible for central banks to take over retail banking at this point and Brazil has demonstrated nicely that taking over payment processing would be a net improvement for everyone. Honestly, I don't understand why we haven't done it already but I suppose entranched interests are partly to blame.
Re: Italy approves 40% windfall tax on banks for 2023 as profits soar
#30Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then again, I'm pretty sure it's going to be misused by the government. I would much rather see regulation forcing banks to raise interest r…
>Unsurprisingly, highly regulated sectors like banking where entering is extremely hard display cartel like behaviors. There is no incentive coming from the competition so why would anyone lower the net interest margin. In this context, I think a windfall tax somehow makes sense. Then
I'm not sure what the banking market is like in Italy, but in the US it's trivially easy to find banks that pay close to or above fed daily funds rates[1]. Sure, your average main st or wall st bank might still be paying 0.1% interest, but there isn't exactly lack of competition either.
[1] first result on google: https://www.bankrate.com/banking/savings/best-high-yield-int...