Italy’s government has taken steps to reduce the proposed increase in the cryptocurrency capital gains tax from an initial 42% to 28%. The League, one of Prime Minister Giorgia Meloni’s ruling coalition partners, has proposed the amendment.
This comes after concerns that the higher tax could discourage investment in Italy’s fast-growing digital asset market. The amendment supported by Prime Minister Meloni’s administration is expected to attract both the crypto investors and businesses within Italy and is the League’s amendment.
Italy Poised to Water Down Proposed 42% Tax on Crypto Trading
"We believe that such a tax isn't right," said the Forz Italia whip. "Going from 26% to 42% has a reason that isn't widely understood by anyone." pic.twitter.com/LdmvyUMphs
— matthew sigel, recovering CFA (@matthew_sigel) November 12, 2024
Industry concerns prompt tax reduction plan
The initial plan of a 42% tax increase that was proposed in the October budget draft was to increase revenue as part of the 2025 economic plan. However, the high tax rate that was introduced elicited fear in Italy’s competitiveness in the global cryptocurrency market.
Industry representatives stated that a 42% tax rate could negatively impact Italy’s appeal for crypto-related business, which includes blockchain, digital asset trading, and investment. They claimed that a lower rate would help Italy preserve its attractiveness to both local and foreign investors.
This would additionally foster the growth of the country’s financial innovation sector. Tether CEO Paolo Ardoino, for example, shared a meme indicating that crypto users might abandon Italy for better environments.
With the proposed amendment, the 28% tax rate helps Italy come closer to its current levy of 26%, thus reducing the tax pressure on crypto investors. This tax policy now awaits the approval of the government and it is expected to be approved soon. If the amendment is approved, investors in cryptocurrencies in Italy will get a clear and, perhaps, favorable set of rules.
Another coalition partner, Forza Italia, has also put forward another amendment to totally remove the tax increase. This proposal also aims at removing the current exclusion of capital gains tax on income not exceeding $2,120.
Also, the League’s amendment provides for the creation of a permanent working group with members from the digital asset companies and consumer groups. This would entail promoting the disclosure of crypto taxes and the provision of learning materials to investors.
Meanwhile, other governments are stepping up their activities to track and regulate the use of cryptocurrencies. In Africa, the Kenya Revenue Authority has cranked up efforts to nab previously unregulated crypto transactions, which it estimates formed 20% of Kenya’s GDP between 2021 and 2022. South Africa’s revenue service is also enhancing its technology to monitor and tax cryptocurrencies.
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