Italy significantly increases capital gains tax on crypto transactions. What’s the intention?

Source: TaxDAO

According to reports from Reuters and Bloomberg, Italian Deputy Finance Minister Maurizio Leo said the government will increase capital gains tax on cryptocurrencies such as Bitcoin from 26% to 42%. 

The Italian cabinet decided to make the change because “the phenomenon (of cryptocurrency use) is spreading,” Leo said of Bitcoin during a conference call on Wednesday, according to Bloomberg. 

The tax hike is part of Italy’s strengthening of its digital services tax, aimed at raising more revenue for the 2025 budget. The price of Bitcoin (BTC) was unaffected by the development, rising more than 12% week-on-week to break through $68,000 for the first time since late July.  

TaxDAO Comments 

Italy's move to raise cryptocurrency capital gains tax to 42% reflects both its urgent need to modernize its tax system and the country's complex attitude towards the digital economy and cryptocurrencies. As the third largest economy in the eurozone, Italy has long faced fiscal deficits and high public debt. This tax increase is obviously a necessary measure to make up for the government's insufficient revenue.  

Italy is a country that is highly dependent on the traditional financial system. The aging society and conservative financial concepts may pose certain obstacles to the popularization of cryptocurrencies. This substantial tax increase may be the government's conservative strategy in dealing with the transformation of the digital economy, trying to find a balance between protecting the traditional financial order and exploring emerging markets.  

What is worrying is that this measure may suppress the activity of the Italian crypto market in the short term, especially for investors seeking a tax-friendly environment. They may transfer crypto assets to other European countries, resulting in capital outflows from Italy and slowing down the exploration and innovation of domestic companies and individuals in the field of cryptocurrencies.