Low Agricultural Prices – Quota for Foreign Wheat -Flour Duty – Aid for Mineral Industry – Tax Changes

«The Economist» 25 luglio 1931, pp. 173-174

Turin, July 19

Public attention is at present focussed upon such sensational affairs as the Hoover Plan, the collapse of German credit and the Pope’s encyclical. Internal economic problems, however, though somewhat in the background, are giving rise, as usual, to a whole crop of legislative interventions. The first sales of the new wheat brought very disappointing prices. As the price per ton of foreign dutiable wheat is about 400-500 lire, and the customs duty is 610 lire, the price of internal wheat should have been about from 1,000 to 1,100 lire. As was shown by Professor Mortara (Prospettive Economiche, 1931), the wheat duty is in the yearly average operative for only three-fourths of its amount, but for the months from July to October the excess of internal over foreign wheat prices is very much less, the duty in 1930 being operative for only a fourth part of its amount. This year the Government had come to the rescue in two ways, first by raising the duty from 521 to 610 lire per ton; second by fixing a quota of 95 per cent, of internal wheat to be milled. The aim was clearly to create a monopoly of the internal market, at least for a certain period, to the benefit of national producers. The monopoly cannot be maintained for the whole year, as in the last four years the average production was 603 million tons and the average imports 207 million tons; but it was hoped that it would aid agriculturists in the most critical period of hurried sales, which always follows harvesting. Predictions were falsified by events, at least in the beginning. Millers were taken by surprise by the quota. The biggest of them, hoping for a rapid reversal of the new policy and worried by the necessity of milling soft or different grades instead of the well-known hard or soft foreign qualities, abstained from purchases. Prices went sharply down; in some places, such as Padova and Rovigo, down to 700 lire per ton. Strong words and sometimes blows were exchanged between middlemen and farmers; carabineers had to be called in. In a Trentino village the local Fascist secretary obliged purchasers to refund the sellers the difference between the price paid and the “just” price. To give millers an interest in buying national wheat, the duty on foreign flour was increased as from July 8th by about 6 per cent, to 929 lire per ton.

The Sardinian mineral industry is also in a serious condition owing to the decline in prices. In the past year duties on spelter were increased; and in June last the duty on lead was also raised from 110 to 220 lire per ton on ingots, and from 275 to 405 for sheets, wires and tubes. As protection was not deemed sufficient to keep the industry going, a grant of 7,000,000 lire was made from the public exchequer for the period from May 1, 1931, to June 30, 1932, to lead and spelter mines companies, on condition that the prices of spelter and lead should not exceed £ 16 per British ton, and that the number of miners and other hands employed should not fall below that on April 16, 1931. Grants, within the limit of seven million lire, can also be made to mines of antimony and lignite. The Minister can exempt from the obligation of employing a fixed number of people should the price of lead or spelter fall below £ 10 per British ton, and in other cases of proven necessity. In this case the grant will be proportionately reduced. The big Monteponi and Montevecchio mining companies are bound to profit by such grants.

The difficulties of the wine industry have been taken into account by a decree of July 11, reducing the tax by 25 lire to from 23 to 50 lire per hectolitre, according to the size of the municipality into which the wine is in troduced. The reduction will cost the Exchequer 390 million lire. Further losses of 80 and 150 million lire will be occasioned by the reduction of the tax on cattle and of the local agricultural rates; with a total tax reduction of about 620 million lire. On the other hand: 1) The sales tax, which had been recendy increased from 0.50 per cent, to 1.50 per cent., is further increased to 2.50 per cent. This expedient was deemed preferable to taxes on flour or textiles, on account of its more general character. Industry and trade observe that the tax will be particularly burdensome in times of economic crisis. The increase of yield is estimated at about 600 millions. 2) The municipalities are authorised to re-establish under the name of consumption taxes the old duties on wild game, fresh fish, sweets, chemical powders for mineral waters, furniture, perfumes, fine soaps, cheese, furs, up to 5 to 10 per cent, ad valorem. The yield is estimated at 150 million lire. 3) Road taxes are extended and increased, with a further yield of 25 millions. 4) In the municipalities of less than 25,000 inhabitants the family tax, a sort of graduated income tax, is reintroduced, with an expected yield of 18 millions. 5) In other towns the house occupiers’ tax is modified and extended, the rate being fixed at from 5 to 9 per cent, of the rent paid, with an estimated yield of 600 millions. The result seems to be a shifting of taxation from the agricultural classes to the general consuming public and to the cities, with total burdens very heavily increasing.

Whether the hoped-for increase of yield will be realised only events can tell. In the eleven months from July, 1930, to May, 1931 (as against the corresponding period of the previous year), there was an increase in the sales tax yield from 392.2 to 832.9 million lire, in customs duties from 2,101.7 to 2,649.8 millions, and in the tobacco tax from 2,174.0 to 2,341.7 million lire. But the sales tax had been increased in the meantime from 0.50 to 1.50 per cent., the price of tobacco by 23 per cent., and the yield from the wheat duty had increased sharply owing to the bad 1930 harvest. Total ordinary revenue, however, increased only from 15,682.3 to 16,183.0 million lire, more than half of the above said particular increases being eaten up by decreases in other fields. It is to be feared that, pending the economic crisis, the same experience will be repeated again. Certainly, and fortunately, the Customs duty on wheat will yield less, as the present harvest promises to be vastly better than that of 1930.