Revenue – Commercial Restrictions

«The Economist», 9 gennaio 1932, pp. 73-74

January 4, 1932

The crisis is beginning severely to affect the revenue. The ordinary revenue “realised” in the first five months of the current fiscal year (July to November, 1931) is only 7,888.6 million lire against 8,333.6 estimated; the extraordinary revenue 30.8 against 71.6 millions. Total ordinary and extraordinary expenditure “incurred” amounted to 8,810 million lire against 8,800.4 estimated. The deficit amounts to 1,381.5 million lire against 830.5 in the corresponding months of 1930. Fortunately, these are, so to say, mythical figures, whose significance is very hard to grasp, mainly owing to the fact that the expenditure incurred or “obligation to pay” is not synonymous with “payment made”; and revenue “realised” is not revenue “cashed”. If we leave aside the niceties of our very complicated accounting language and look at the hard facts of revenue “cashed” and expenditure “paid” the results are better, namely, 6,479.1 million lire of revenue cashed and 6,124.2 millions of expenditure paid, during the period July to November 1931. In the same period of 1930 revenue amounted to 6,905.0 and payments 6,124.6 million lire. As usual at this time, creditors, mainly entrepreneurs, who have executed works for State account or sold goods to public authorities, complain of an unusual slowness in overdue payments.

The Exchequer is bent on maintaining a strong cash reserve, which at November 30, 1931, reached the high figure of 2,321.0 million lire. Following methods already adopted in 1923 and 1924, the Exchequer keeps the largest part of this fund deposited on current account at the Bank of Italy. These deposits amounted to 2,075.5 million lire at November 20′ , thus keeping the note circulation correspondingly lower. The most important decreases are in revenue from taxes on transactions. Revenue from registration taxes fell from 321.8 to 275.4 millions, stamp duties from 261.7 to 252.5; mortgage taxes from 69.6 to 65.3; duties on securities from 180.4 to 165.1 million lire for the five months’ period. The only increase is in the sales tax, from 398.9 to 488.4 millions, but the tax-rate was in the meantime increased from 0.50 to 1.50 and ultimately to 2.50 per cent. Consumption tax revenue decreased from 2,262.5 to 1,839.5 million lire; lottery revenue from 155 to 146.9; and the tobacco monopoly from 1,057.4 to 1,005.8 million lire. This last is the most disappointing item, as in the Spring of 1930 tobacco prices were put up by 23.10 per cent., and 12 per cent, of the total yield, up to 500 million lire yearly, was appropriated to the Public Debt Sinking Fund. The increase of the yield was from the first much less than had been hoped, and now there is a net decrease. The Sinking Fund never received its quota except for the very first months and is at present practically in abeyance, as it is a vain pretence to reduce public debt in the face of a deficit. The State Railway Accounts for 1930-31, now published, closed with a surplus of 482 million lire, against the 584 million in the preceding year. The surplus, although not a true net surplus, because interest and amortisation of old capital and other minor capital expenses are borne by the Treasury out of the general State Budget, is welcome, because it means that the crisis has not played havoc with the State Railways. Revenue decreased from 4,826 in 1929-30 to 4,166 million lire in 1930-31; but as expenditure decreased also from 4,281 to 3,694 millions, a surplus was maintained. There is some misgiving about the reduction in the expenditure for maintenance of tracks, rolling-stock, and renewals and improvements; the fear is lest savings should be made at the cost of efficiency. Professor Flora, member of the board of directors of the State Railways, states, however, that no loss in efficiency is to be feared, thanks to generous allowances of past years. In the five months July to December, 1931, the decrease in traffic revenue continued; it fell from 1,871 to 1,541 million lire.

Italy is joining, not without reluctance, in the general rate of commercial restrictions. On the one hand the compulsory quota of national hard wheat to be milled, which was lowered from 95 to 75 per cent, as from November 1st, has been further reduced to 50 per cent, from January 1st, the quota of soft wheat remaining apparently fixed at 95 per cent.; on the other hand, a cattle quota is introduced for the first time. The number of cattle imported in the first ten months of the year decreased from 218,421 in 1930 to 154,117 in 1931, and fresh and frozen meat from 50,460 to 41,908 tons. Prices are lower by 50 per cent., and a further fall in prices for Jugoslavian imports was feared. A decree of December, 1931, and a subsequent regulation of the Minister for Agriculture fixed at 85 per cent, the compulsory quota of home cattle to be slaughtered. The price of cattle on the home markets is firmer.

Encouraged by success, other people are clamouring for restrictions. Imports of motor cars are subject to prohibitive duties, but out of 20,000 agricultural tractors operating in Italy, 16,000 are of foreign makes. In the first nine months of 1931 agricultural machinery imported totalled 41.2 and agricultural implements 7.5 million lire. Mineral phosphates imported in the first ten months of 1931 still totalled 398,916 tons (749,397 in 1930); copper sulphate, 8,755 (12,545 in 1930); nitrate of soda, 50,922 (69,975 in 1930); sulphate of ammonia, 5,433 tons (18,848 in 1930); potash fertilisers, 15,001 tons (38,389 in 1930); other chemical fertilisers, 57,556 (98,860 in 1930). Although all items are fast decreasing, the residuum is still excessive in the eyes of home producers, who would like to see imports reduced, by higher duties or the quota system, to the level of calciocyana-mide, which fell to 45 tons in 1931, against 10,868 tons in 1930 (first ten months). There is an ample unused domestic productive capacity, as the production of superphosphates decreased from 1.19 to 0.69 million tons between 1930 and 1931 (first ten months); and sulphate of copper could be produced at a rate of 200,000 tons a year instead of the present 66,000 tons.

On December 23rd a writer of the Sole, and influential commercial daily, complained that Tripolitania imports from Italy only 150 million lire worth of goods out of 250 millions total; Cirenaica 95 out of a total of 150; Eritrea 120 out of 200; Somalia 35 out of 140, and the /Egean Isles 20 out of 75. Italy should capture the whole or almost the whole of this trade. Another writer in the same newspaper is scandalised that in 1930 foreign ships transported 13.4 million tons out of a total of 35.6, and proposes that lower duties shall be charged on goods carried under the national flag.

Some people are beginning to wonder what will be the result of this universal scramble to reduce imports. Signor Belluzzo, an ex-Minister, who is president of the “Buy Italian” campaign, fears retaliations against increases of duties. The Council of the National Federation of Iron and Steel Traders is careful to point out the risk of retaliation inherent in a high tariff policy, but is in favour of the “Buy Italian” campaign, and earnestly urges its 23,000 members to prefer national goods, hoping that industry will aid the movement by a policy of just prices. In September a new general duty of 10 per cent, was put on all imports. A decree published on January 1st in the Official Gazette empowers the Governement to limit or prohibit imports of such goods as the Finance Minister shall deem advisable in reference to impediments put by foreign countries to our exports.

For the third time monthly figures of foreign trade are favourable; there were export surpluses of 39.4, 34.9, and 42.9 million lire for September, October and November, 1931, as against import surpluses of 370.0, 280.5, and 342.7 million lire in the corresponding months of 1930. As the situation of national industry is no better in consequence of that long-hoped-for achievement, it is beginning to be realised that an export surplus is not an unmixed benefit, as it may be the effect of the failure of invisible exports or of a dangerous limitation of raw material imports or both. England’s abandonment of free trade has caused the fact to be recognised that it is impossible to export if everybody is refusing to buy. From the excess of ill, we may thus at last hope for a ray of light in the shape of international agreements, even if these appear in the crude mercantilist garb of quotas, pooling of foreign exchanges and other devices strangely reminiscent of a bygone era.