Italy Dashes Hopes of Expanded Tax Benefit for Bank Deals

A beefed-up tax benefit Italy’s government originally planned for mergers and acquisitions in the banking industry has been scrapped from a 40 billion-euro ($49 billion) aid decree.

The article dropped from the draft legislation originally expanded the duration and scope of a fiscal benefit which allowed buyers of a bank to boost capital by transforming deferred tax assets from lenders involved in a deal into credits.

The measure was originally introduced at the end of last year as part of a package to entice potential buyers of state-owned Banca Monte dei Paschi di Siena SpA, and its planned expansion had fueled speculation of a renewed wave of Italian banking deals.

Shares in Monte Paschi fell as much as 2.2% while Banco BPM SpA fell as much as 5.3% following the Bloomberg report.

An earlier draft of the package raised the tax relief for buyers of up to 3% of assets from the current 2%. It also pushed back by six months, to June 2022, the deadline to make use of the relief.

Finance minister Daniele Franco said at a press conference in Rome on Thursday that government only made minor changes to the norm, keeping the 2% limit in place. Deals benefiting from the relief can now be finalized into 2022 if they were approved already this year.

The stimulus package also sets a 100 million-euro budget to finance operations of bankrupt airline Alitalia SpA for a maximum of six months.

©2021 Bloomberg L.P.

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