Italy. Restriction on the sale of occupied houses. Exemption from taxes to foreign loans. Succession duty. Increase of failures

«The Economist», 25 agosto 1923, p. 298

Turin, August 4

After my last letter, a group of interesting Royal decrees has been published in the Gazzetta Ufficiale. The War Rents Restriction Acts encouraged the sale of flats, and even of single rooms, to tenants as a means of escaping the ruin with which restrictions threatened the landlords. Proprietors, who received nothing, or almost nothing, as the net rent of their houses, were very glad to sell them piecemeal to their tenants; and tenants rejoiced in the hope of escaping future increase of rent, when freedom would be reintroduced in the rent-market, by the payment of a somewhat liberal capitalisation of present rents.

Rent restrictions were abolished by the Royal Decree on January 7, 1923; but the Arbitration Committees did not allow landlords to increase rents at will, with the result that piecemeal sales were encouraged. When tenants, owing to shortage of money, were unable to purchase flats or rooms occupied by them, a middleman took charge of the affair. He purchased the house as a whole, and, by threats of selling the rooms to other people – who, as landlords, would have the right to evicting the present tenants, compelled tenants, however unwilling, to purchase at a high price. A decree of July 7, 1923, proposes to stop these speculative operations. In the event of sale, the new landlord is bound to respect current leases, and tenants cannot be evicted by new landlords.

The praise justly given to the Royal Decree of December 16, 1922, exempting from Italian income-tax all loans issued in foreign countries for the purpose of importing new capital into Italy, gave place to criticism when the regulations were published recently. These prescribe that borrowers (1) must exhibit a public deed of loan; (2) indicate the use to which the proceeds of the loan will be applied; and (3) within six months of the provisional approval of the Finance Minister, give proof that the loan has been issued in conformity with the regulations. Then only will exemption be accorded; but it is always open to revocation if the proceeds are applied to purposes other than the original ones, or if other regulations are unobserved.

It is feared that those restrictions will somewhat limit the usefulness of the exemption-decree as a means of promoting the introduction of foreign capital in Italy, and it is earnestly hoped that, in his usual experimental way, the Finance Minister will simplify the procedure.

I have repeatedly called attention to the loud complaints aroused by the extraordinary severity of the succession duty, which comprises the taxes known in Great Britain as estate, succession, and legacy duty.

The rates are as follows, and fall on the amount severally received by heirs and legatees:

In certain cases additional taxes are imposed, and when it is remembered that debts are not wholly deducted, that valuations are often very high, and that money, jewels, and furniture are valued at fixed rates, it is not surprising that heirs or legatees frequently prefer to relinquish their rights wholly to the benefit of the exchequer.

When the present Minister took charge of his office hopes were held of a betterment, but, as time went on, it was feated that nothing would come out of these. Suddenly Signor De Stefani proposed in the Cabinet Council that the succession duty should be wholly abolished in the family group, and the proposal was unanimously carried. It appears that this category comprises parents and sons, brothers and sisters, and husband and wife. The succession duty is to be retained only between uncles, nephews, cousins, and strangers, but rates will be reduced in these cases.

The reform is a bold one. Perhaps 85 per cent. of the present yield of the tax is to be given up. As the yield was in the present year about 300 million lire, the sacrifice on the part of the exchequer is considerable. Signor De Stefani briefly sums up the reasons in favour of the abolition of the tax: (1) The reinforcement of the family institution; (2) the injustice of the existing tax, which leaves scot-free almost all movable wealth and bearer securities, and which bears almost exclusively on real property; (3) the injustice of a tax which weighs more on the South than on the North of Italy, as in the South the wealth consists in very large measure of land and houses, which cannot escape taxation; (4) the stimulus which should thereby be given to savings.

As in other countries, the war had a beneficial effect on the number of failures, but this result was really quite abnormal. Profits were high enough to allow even inefficient men and badly managed enterprises to prosper. In 1921 the laws of competition re-asserted themselves, and failures increased. The increase is progressing in 1923:

While the average figures of 1912-1915 have not as yet been reached, progress towards a normal elimination of the unfit is noteworthy.