Italian finance and the new taxes

«The Economist», 4 settembre, 1909, pp. 459-460

The new fiscal year in Italy has now opened, and amid many unfavourable omens. The fiscal year 1908-9 closed, it is true, with a surplus of some few millions lire; for, together with increasing expenditure, the State’s principal income also showed an increase as compared with the previous year:

The great increase in Customs is due to the yield of the wheat duty, which was considerable, in consequence of the bad 1908 crop. But this year the wheat crop has been fair; so that the imports of foreign wheat will be materially reduced. The yield of Income-taxes (land tax, house tax, and industrial, commercial, and professional income-tax) is bound to diminish also in 1909-10. In the month of July just past the yield of the industrial and commercial tax diminished by 212,045 lire. The effects of the economic crisis of 1907 and 1908 will, indeed, appear in the new year in the yield of the industrial and commercial tax (imposta di ricchezza mobile), as the assessment of incomes in 1908 and 1909 was based on the balance-sheets of joint-stock companies for 1906 and 1907, which were years of high dividends and prosperity, while the assessment for the 1910 tax will have to be based on the balance-sheets for 1908, which disclosed reduced dividends and great losses. These facts have induced Signor Carcano, the Secretary of the Treasury, to address a letter to his colleagues in the Cabinet, urging economies in the Budget scheme for 1910-11, which the various departments have to compile during the recess. But economy is easier to preach than to practice, and there has been much talk of new taxes. The present fiscal system, with its salt tax of 40 centesimi (4d) per kilo, with its wheat duty of 75 lire the ton of 1,000 kilos, with its sugar duty of 99 lire the quintal of 100 kilos, is to be left intact. Even the heavy taxation of sugar, which leaves a protection of 27.85 lire per quintal to the manufactures (27.85 lire is the difference between 99 lire duty on foreign sugar and 71.15 lire excise on internal sugar), is to continue undisturbed, as a reduction of the protection to the 6-lire level prescribed by the Brussels Convention (a reduction which would be of great benefit to the consumers and to the State Exchequer) would hurt the potent tariff nursed sugar trust.

A match monopoly, in addition to those on tobacco and salt, is seriously contemplated to reinforce the State income. As, however, a match monopoly is mainly a tax on the masses, the Government is to-day seeking some other tax which will fall primarily on the classes. To find it is by no means easy in a country in which the incomes are already taxed by the State, the provinces, and the communes, to the extent of 10 to 60-70 per cent. To begin with, Parliament has approved in the last days of the session, almost without discussion, of a tax which apparently will not hurt the Italian taxpayers, but only the foreigner.

In future no security is to be imported into Italy without being subject to a new stamp tax. The Rentes (Consols), bonds, and other securities issued by any foreign State are to be subject to a stamp duty of 1 per cent, on the face (nominal) value. Any fraction of 100 lire is calculated as a whole, so that a security of a face value of 250 lire is to be taxed as one of 300. From the tax are exempt only the Exchequer bills issued by a foreign State falling due within five years. The shares, bonds, and other securities issued by cities and provinces of any foreign State or by joint-stock companies or by any corporation are to be subject to a stamp duty of 2 per cent, on the face value. Such securities as are not regularly stamped cannot be sold or be the object of any operation on the Stock Exchanges or by banks. No security can be created by any public or private document which is not stamped. A fine of twenty times the tax is imposed on the contraveners of the law. The fine is to be paid by buyer, seller, brokers, bankers, &c. The banker is liable to the fine even if he limits himself to the payment of coupons on non-stamped foreign securities.

The new tax will undoubtedly prove an obstacle to the introduction of foreign securities into Italy. Of late years the Italian capitalist had commenced to interest himself in foreign Consols – Spanish, Russian, Argentine, &c, – and the fear of taxation will send the small investor back to the familiar Italian Consols. The difficulties which the Government encounters in the sale of the new 3.50 per cent, railway bonds (it was announced at the time of the issue that the amount offered for sale, 85 millions lire, was oversubscribed; but it appears now that a substantial portion was left to the underwriters) has perhaps inspired legislative action against foreign securities. But the great and even the small capitalist will always find a way to elude the new stamp duty, so that the foreign securities will preserve a less easy but an increasing market in Italy.