Deficits – Taxation – Stock Exchange

«The Economist», 6 febbraio 1932, p. 301

Turin, February 1

Official statements have now been published relating to past and current budget deficits. The Court of Accounts has definitely approved the accounts for the fiscal year 1930-31, closing with a deficit of 504 million lire. This is less than the deficit provisionally announced last July, which was 896 millions. The latter, according to our accounting methods, is the deficit of the budget proper, i.e., revenue and expenditure, made or to be made, relating to the fiscal year in question. On the other hand, the account of residui, or uncashed or unpaid balances on account of fiscal years up to June 30, 1931, closed with an increase of 341.9 million lire (from millions to 2,735.7 millions) in the revenue still to be received, and a decrease of 922.5 million lire (from 6,974.2 millions to 6,051.7 millions) in the expenditure to be made. So far so good. Leaving out of account past revenue still due, which is an uncertain affair, the 504 million lire deficit of 1930-31 appears to be fairly compensated by the decrease of 922.5 millions in unpaid balances.

The situation with regard to present and future budgets is more serious. The first six months of the current fiscal year close with a deficit of 1.668.9 million lire, and the Budget for 1932-33 reveals an estimated deficit of 1,412.7 millions. It would not be an easy task to find new sources of revenue, as the limit of taxation seems to have been reached. Signor Mazzucchelli, in the January issue of the Rivista Bancaria, has pointed out that, notwithstanding the fact that new taxes to raise an additional yield of 459 million lire in the period from July to November, 1930, were imposed, revenue increased only by 239 millions (from 7,649 millions to 7,988 millions) compared with 1929; likewise, in spite of 365 million lire new taxation in the same period of 1931, revenue decreased by 600 millions (from 7,988 millions to 7,388 millions) compared with 1930. Signor Rocco, Minister for Justice, points out in an authoritative statement to La Stampa that any increase of taxation would be useless and would most probably result in a further decrease of yield, as the crushing burden of increased taxation would compel many taxpayers to go out of business. Nor is it easy to effect further economies, and, if they proved possible, they might react unfavourably upon revenue. Therefore, says Signor Rocco, the only alternative open to statesmen is to influence the economic situation in such a way as to limit the effect of the crisis. Signor Olivetti, General Secretary of the Confederation of Industry, in another statement to the Press, remarks that the best beginning to the solution of the world crisis would be the tackling of the monetary problem. It is useless to pretend that budget deficits and economic crises can be remedied while monetary systems are unstable. Nobody can work and plan on the base of unstable money. Only an international conference, however, can grapple with monetary problems.

Optimism on the stock exchanges has continued. Bank of Italy shares, which had been marked up from 1,381 on January 9 to 1,430 on January 16th, closed on January 30th at 1,500; Fiat rose from 130 to 145 and 155 between the same dates, notwithstanding that the dividend may be passed; Edison from 440 to 483 and 493; Beni Stabili (real estate) from 560 to 573 and 583; Eridania (sugar) from 240 to 248 and 277; Snia Viscosa, which has lately increased its turnover and will distribute a dividend of 14 lire, increased from 165 to 185 (after a grouping of five old shares into one). Shipping securities are dormant; so are banking shares, with Credito Italiano pegged at about 700 lire and Banca Commerciale Italiana hovering around 1,100. The new Institute of Industrial Credit, which, it was said, would have relieved the “Sofindit” of a great part of the securities passed on to the latter from the Banca Commerciale, does not appear to have begun operations. Senator Mayer, president of the Institute, is reported as willing to assume responsibility only for sound securities with a safety margin under real values; so that it should not be necessary to call upon the State guarantee for debentures issued. Operations are therefore bound to drag on, and mobilisation of frozen bank assets is going to be slow.