Tariff Reprisal – Motor Duties – Tax Increases -Diminished Revenue – Production Indices

«The Economist», 19 luglio 1930, pp. 123-124

Turin, July 6

The immediate effect in Italy of the American tariff has been an all-round increase of our Customs duties upon all classes of motor vehicles. Under the 1921 tariff the duties per ton decreased as the weight increased. In the new tariff there are three schedules. The first schedule comprises passenger cars on which the duties are increased to 3,000, 4,000 and 4,400 gold lire per ton for cars weighing respectively, under 0.7 tons, from 0.7 to 1.2 tons, and over 1.2 tons. In the second schedule are included tractors, with a uniform duty of 1,200 gold lire per ton. The third includes all other motor vehicles, i.e., trucks and lorries for the transport of goods. They are classified on the same lines as passenger cars with an extra class for vehicles exceeding 1.8 tons in weight.

Chassis for commercial vehicles pay according to the scale for passenger cars; and chassis for passenger cars pay the duty of the weight-category immediately above their own. As the gold lire must be converted into actual lire at the rate of 3.667, the result is that whereas a one-ton motor car, valued at 14,000 actual lire duty-bound would have paid under the old tariff, 2,385 lire specific duty, and 4,900 lire as 35 per cent, ad valorem duty, totalling 7,285 lire, according to the new tariff it pays 14,660 lire. Separate mechanical parts, unfinished, will pay 2,600, and finished parts 4,800 gold lire per ton; other parts, unfinished, 2,000, and finished 4,400 gold lire per ton. Until December 31, 1930, however, this duty will be on a lower scale provided that the imports do not exceed a maximum to be fixed and distributed between the existing factories by a decree of the Finance Minister.

The aim of the new tariff is to exclude, as far as possible, all foreign motor vehicles, imports of which increased in number from 1,648 in 1924 to 7,409 in 1929, and in value from 18.5 to 98.7 million lire. Probably a stop will be put to the import of practically all foreign cars except the very highest class, and tractors, but it is doubtful if exports will increase, as some sanguine men hope. Exports of motor cars from Italy, after increasing from 18,988 in 1924 to 34,194 in 1926, steadily decreased to 23,689 in 1929. The decrease in value is even greater; from 719.9 million lire in 1926 to 355.7 in 1929. If the internal market were large and expansive, the prohibitive protection now granted would make it possible to subsidise exports to such an extent as to push sales in foreign markets, but it is doubtful if such a dumping policy can succeed. If we suppose that internal sales absorb one-half of the total production (in 1928 the number of cars exported was 28,280 out of a estimated production of 55,100), the rise in internal prices would have to be substantial to allow of an adequate export subsidy. Moreover, with all incomes reduced as they are at present, an increase of internal prices would be greatly resented by consumers.

After the big increase in the price of tobacco, a new tax increase was suddenly announced on June 29^th: the turnover tax, which was reduced by a Royal Decree on July 28, 1929, from 1 to 0.50 per cent, in general, and from 0.50 to 0.25 per cent, for raw materials, broken iron, building materials, and raw chemical and agricultural products, is again increased to a uniform rate of 1.50 per cent, on the value of sales made in the internal market between producers and middlemen. The yield of the tax which decreased from 783.2 million lire in 1926-27 to 392.2 in the first eleven months of the present fiscal year, is estimated to increase to 1,100-1,200 million lire. The reason of the increase is a new grant of 500 million lire to war, navy and aeronautic budgets, and of 200 million lire to public works. A more general explanation of all the successive recent increases in taxation; in the stamp and succession duties, and coffee, tobacco and turnover taxes, is the slackening of the yield of existing taxation. The total exchequer tax and net public services revenue in the first eleven months of 1929-30 was 15,682.3 million lire, against 16,439.9 in the corresponding months of 1928-29. It seems that the taxable capacity of the country has been streched to its maximum for the present.

The first agricultural crop of the year has been the occasion of many misgivings. Cocoons, which in afterwar boom years reached 38,000 lire per ton, and in recent years sold 13,000 lire, are now selling at from 8,000 to 6,500, and recent quotations are even lower. Farmers and landholders are bitterly complaining that this price means an absolute loss for them. Silk weavers, on the other hand, retort that they cannot pay more than that, because the loss of the American market makes it very difficult for them to work without loss. Wine also, owing to the reduced incomes of city working men, and to the high consumption tax, is selling badly.

Unemployment, which, in 1929, decreased from a maximum of 489.347 in February to 227,682 in May, decreased in 1930 from the January maximum of 466,231 to 367,183 in May. Goods transported on private customers account on the State railways during the first five months of 1930 amounted to 22.3 million tons, against 23.5 in the corresponding period of 1929. All these are symptoms of the extension to Italy of the general economic crisis. The only favourable symptom is the increase in the production of electrical energy from 2,936,954,000 kilowatts in the first four months of 1929 to 3,130,961,000 kilowatts in the same 1930 period. As electrical energy is mainly sold for industrial purposes, this increase may mean that against the indubitable slackness in the biggest industries of the country, there are at work some factors as yet not ascertained by the official statistics, perhaps in new southern sections, or in lesser industries, which may in future ease the recovery of the economic situation at large.