Italy Reduces Proposed Crypto Tax Hike to 28% Amid Industry Concerns

This decision reflects an attempt to balance the government’s revenue goals with concerns about the potential impact of high taxes on the country’s digital asset market. The proposed reduction has gained traction within Prime Minister Giorgia Meloni’s coalition, with an amendment led by the League party, which is aimed at making Italy more appealing to crypto investors.

Why Italy’s Government Scaled Back the Increase

The original proposal, part of Italy’s October budget draft, sought a sharp rise in the tax rate to 42%, up from the existing 26%. This aggressive move was designed to increase tax revenue as Italy works to stabilize its public finances amid the reinstatement of European Union fiscal policies.

However, industry advocates and crypto executives cautioned that a tax this high might deter investment and hurt Italy’s ability to compete in the EU. The Italian government seems eager to steer clear of policies that would hinder the expansion of its digital asset industry as the EU is ready to enact its first complete crypto rules under the Markets in Crypto-Assets (MiCA) framework.

The League party, a junior partner in Meloni’s government, proposed a compromise by capping the crypto tax rate at 28%. This middle ground aims to generate needed funds while maintaining an attractive environment for digital asset activities in Italy. The measure has gained support across the government, though it remains subject to final approval and could see further amendments before implementation.

Additionally, the proposal includes creating a working group with representatives from digital-asset firms and consumer organizations. This team would work to improve transparency around crypto taxation and provide investor education resources, a move that could further enhance Italy’s appeal to the crypto industry.

Another coalition partner, Forza Italia, proposed a separate amendment, calling for the elimination of the tax increase entirely and suggesting the removal of the current tax exemption on crypto gains below €2,000. According to Forza Italia members, the initial jump to 42% was unnecessarily steep and risked making Italy’s tax regime unappealing for both local and foreign investors. The proposed adjustments indicate a willingness within the coalition to create a more supportive climate for digital asset investments.

Finance Ministry Expresses Flexibility

Italy’s Finance Minister, Giancarlo Giorgetti, has shown flexibility regarding the proposed tax structure. He recently suggested the possibility of implementing different tax rates based on how long an investment is held, which could benefit long-term crypto investors. Giorgetti’s stance signals the government’s openness to exploring policies that could foster sustainable growth in Italy’s crypto market without discouraging investment.

This tax adjustment comes as Italy works to address its fiscal challenges while staying competitive in the rapidly evolving crypto landscape. Some nations, such as India, have implemented similar tax hikes, but the outcomes have been mixed, with high rates often pushing investors to move their funds to overseas platforms. Italy’s revised approach aims to find a balance between public revenue and competitiveness, a challenge that governments worldwide are facing.

In a related trend of digital finance adoption, the city of Detroit recently announced plans to accept cryptocurrencies for tax payments by 2025, marking a pioneering step in blockchain integration within public services. As regions explore digital asset policies, this recalibrated tax policy demonstrates Italy’s effort to develop a balanced crypto regulatory framework that aligns with EU standards, supports investor confidence, and fosters growth in the country’s digital finance sector.