Italy Likely to Reduce Proposed 42% Crypto Tax Amid Pushback

A tax hike on crypto capital gains to 42% proved very unpopular in the Italian Parliament, with governing coalition members filing dissenting amendments. The second-largest party proposed 28%, while the third-largest moved to cancel it.

These coalition members will need to agree upon, pass, and implement this tax policy during a huge bull market, making a reduction very likely.

Italy Might Reduce Crypto Tax

According to a recent report from Bloomberg, a new Italian crypto capital gains tax will likely be lowered from 42% to 28%. Maurizio Leo, a Deputy Economy Minister in the leading Fratelli d’Italia (Fdl) party, proposed these high crypto taxes in mid-October. However, this move proved unpopular with Fdl’s coalition partners, Lega and Forza Italia (FI), who have come out against it.

Specifically, Lega, the second-largest group in the coalition, proposed an amendment reducing the tax from 42% to 28%. Italy’s current tax rate on crypto gains is 26%, turning this major hike into a minuscule change.

However, even this softer proposal is not set in stone. The third-largest government party, FI, filed a separate amendment to cancel the tax hike entirely.

“We believe that such a tax hike isn’t right. Going from 26% to 42% has a reason that isn’t widely understandable by anyone, whether that be a normal citizen or a large investor,” said Paolo Barelli, the Italian Senator.

Nevertheless, Barelli clarified that his party won’t insist on canceling the tax hike outright. Instead, he wished to signal that coalition members should consider several options “in that direction.” The exact future of these amendments is currently uncertain, but previous disasters in crypto tax policy are also being discussed.

Around the world, crypto tax policies have been loosening in several jurisdictions. For example, South Korea proposed a delay in tax implementation in July, and Japan began reviewing tax laws for possible cuts in September. In October, the UAE even passed an outright exemption.

In any event, Italy is preparing to integrate into the European Union’s MiCA crypto framework. The Italian government will have to accommodate international markets and policies in several key areas. Now that the crypto market has entered such an unprecedented bear market, it may increase pressure to loosen these taxes.

For now, even Lega’s 2% tax increase is a long way off. These coalition partners will need to decide on a new rate. They will need to pass and implement a new amendment.