Is Italy’s 28% Crypto Tax a Smart Move or a Major Misstep?

The Italian government is rethinking its plan to raise taxes on cryptocurrency transactions, aiming to reduce the rate from 42% to 28%.  The change reflects Prime Minister Giorgia Meloni’s coalition’s aim to balance public revenue with support for Italy’s growing digital asset industry.

Factors Driving Italy’s Controversial Crypto Tax Hike

In early October, Italy proposed raising the capital gains tax on crypto assets from 26% to 42% to boost public finances as part of its budget plan. This move, aimed to fund election promises and address budget deficits, quickly faced criticism from the crypto community and industry leaders.

Deputy Finance Minister Maurizio Leo defended the tax increase, pointing to the rapid growth of cryptocurrency investments and Bitcoin’s rising role in Italy’s economy. “The phenomenon is spreading,” he noted. However, industry leaders opposed the 42% tax, warning it could harm Italy’s competitiveness, especially with the EU preparing to introduce the Markets in Crypto-Assets (MiCA) framework.

Is Italy’s Crypto Tax Balance Achievable? 

In response to the criticism, the League, a smaller party in Meloni’s coalition, suggested setting the tax rate at 28%. This proposal aims to balance generating government revenue with supporting industry growth. Sources of the talks say the League’s plan is designed to help Italy remain competitive in Europe’s crypto economy without discouraging investment.

Forza Italia, another party in the coalition, proposed an amendment to exempt crypto gains under €2,000 from taxes. This suggestion encourages more Italians to get involved in the digital asset market by offering tax relief to smaller investors. Paolo Barelli, Forza Italia’s whip in Parliament, said, “We believe this tax increase isn’t right. Going from 26% to 42% doesn’t make sense to most people, whether they’re regular citizens or large investors.” Barelli described the proposal as an “invitation” for the government to consider a more balanced approach that accounts for the changing digital economy.

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Industry leaders are concerned that a high tax rate could push crypto investments and businesses to other European countries with more favourable crypto policies. As the MiCA regulation aims to create a uniform crypto framework across the EU, Italy’s decisions on taxation are closely watched as an example of how EU member states will balance regulation with innovation. Analysts warn that Italy’s proposal to nearly double the tax rate could put the country at a disadvantage, potentially causing a capital outflow as investors move to more tax-friendly countries. With France and Germany adopting a more cautious approach to crypto taxation, Italy’s policy could influence future tax discussions across the EU.

Could a Graduated Crypto Tax Model Help Italy Align Regulation and Growth?

The Finance Ministry has been cautious about revealing details on the crypto tax rate. However, Finance Minister Giancarlo Giorgetti has shown openness to considering different taxation options. “I am open to different tax models depending on how long the investment has been held,” he assured, suggesting a graduated tax system based on the duration of asset ownership.

The League also proposes a permanent advisory group of digital asset companies and consumer advocates to guide crypto policy, improve investor understanding, and offer industry insights. The government is open to this idea, which aligns with calls for higher taxes on short-term trades and lower rates on long-term holdings—a model supporters believe will encourage stable investment.

Conclusion:

In conclusion, as Italy’s digital asset market continues to grow, the outcome of the proposed tax amendment could set an important precedent. A balanced approach with the suggested 28% rate could help safeguard public revenue while supporting sustainable growth in the crypto sector. Italy’s crypto policy could shape its role in the European crypto market and offer insights for other EU nations on balancing regulation, taxation, and innovation.

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