Italy to Reduce Planned Crypto Tax Hike from 42% to 28%

Italian Prime Minister Giorgia Meloni’s government is likely to approve a proposal from a coalition partner to reduce the planned tax hike on cryptocurrency trades, as reported by Bloomberg.

The League, a junior partner in Meloni’s coalition, has suggested amending the tax increase to 28%, down from the 42% initially proposed in last month’s budget, based on a copy of the proposal seen by Bloomberg News. The current tax rate stands at 26%.

Crypto industry leaders had argued that the original tax hike was too steep and could undermine Italy’s competitiveness compared to other EU countries. This comes as the European Union prepares to implement its first comprehensive crypto regulations, known as the Markets in Cryptoassets (MiCA), by the end of this year.

Forza Italia, another party in the ruling coalition, has proposed a separate amendment, also reviewed by Bloomberg, to eliminate the tax increase altogether and scrap the exemption on gains below €2,000 ($2,120).

Under the League’s amendment, Italy would create a permanent working group comprising digital asset firms and consumer groups to educate investors on crypto. Although the government is likely to support the League’s proposal, no final decision has been made, and changes could still occur, according to sources who spoke on condition of anonymity.

The Finance Minister Giancarlo Giorgetti indicated that he is open to exploring alternative tax structures based on the length of time an investment is held.

The push to modify the tax plan comes as Italy seeks to bolster its public finances following the reintroduction of EU fiscal rules. Faced with sluggish economic growth and rising public debt, Meloni’s government has been forced to make difficult budgetary decisions, though it has refrained from reintroducing a windfall tax on corporate profits as it did last year.

Some countries have attempted to tax crypto trading with limited success. For example, India introduced such taxes in mid-2022, leading to a sharp decline in domestic trading volumes as investors shifted to offshore platforms.

Meanwhile, Bitcoin has surged in value since Donald Trump’s decisive election victory last week. Trump’s win, along with the success of pro-crypto candidates in Congressional elections, has renewed optimism for more favorable regulatory policies in the near future.