The Italian budget and the loan

«The Economist», 9 gennaio 1915, pp. 56-57

The revised estimates of the Italian Budget for the year July, 1914-15, have just been issued. These show an estimated aggregate increase in expenditure of 1,159 1/2 million lire; an estimated aggregate decline in income of 123 1/4 million lire – i.e., a net estimated deficit of l,282 3/4 million lire. By far the largest item on the expenditure side is the Army vote, which has risen from 609 million lire in 1913-14 to an estimated 1,244 1/2 millions – a rise of 635 1/2 millions. The Navy vote has risen by 79 3/4 millions. The table shows the expenditure of these two departments for the last 10 years:

The extraordinary calls made on the Treasury for military preparations after the outbreak of the war strikingly contradict the official repeated boast of the former Cabinet of Signor Giolitti that the Libyan War had increased, and in no way infeebled, the power of the Italian Army and Navy. By a right sentiment of national and patriotic duty, none of the few Deputies who spoke in the recent Parliamentary debates insisted on the much-discussed question of the real state of the Italian armaments at the moment the big European conflict broke out. The question, however, remains open for future exhaustive debates, and the present Premier, Signor Salandra, deserves most sincere approbation for his solemn pledge to communicate in proper time to Parliament all the necessary documents to clear up the responsibility of his own and of the previous Cabinets. Of course, the revised estimate of Signor Carcano, closing with a deficit of 1,282.91 million lire at the end of the present fiscal year (June 30, 1915), is founded upon the supposed maintenance of the Italian neutrality till the cessation of the war.

In the eventuality, ever more probable, of an armed intervention of Italy against the Central Empires in the months of next spring, we shall have to face a further rise in expenditure, and a simultaneous falling in the principal items of the revenue, which in the revised estimate of Signor Carcano has been in part made good by the imposition of new taxes.

The effect of the war on Italian national finance is reflected in a decline in total revenue for the four months July-October of 38.7 million lire. The revenue, which amounted to 702.5 million lire for the corresponding period of 1913, is down to 663.8 million lire. The heaviest declines are in Customs (-30.2 million lire) and Excise (- 13.6 million lire); though the revenue from certain State monopolies actually increased – e.g., tobacco, by 9.4 million lire. But the net decline in taxes on consumption amounted to no less than 33.6 million lire. Income-tax, succession duties, stamps, &c, fell by only 2.4 millions. On December 11th a Government Bill was passed by the Chamber by 260 votes to 45 increasing the taxes on income and capital by 10 per cent. This increase is additional to the 3 per cent, rise in all duties on income, stamps, &c, passed on June 26th. The Government has done well in not attempting to increase the already crushing burden of indirect taxation; but the income-tax is heavier than the British war tax. The table shows how the increase will affect the various classes of taxpayer:

Graduated exemptions under Schedules E, F, G are granted in respect of incomes not above 1,500, 1,600, and 2,000 lire. Incomes under Schedules A and B are subject, as those under D, E, F, and G are not, to provincial and communal super-tax, which is generally so high as to treble the income-tax in respect of these Schedules.

For the moment the Treasury has met the exceptional strain of the extraordinary military expenditure by means of a floating debt, consisting principally of an elarged circulation of notes, both of the State and of the three banks of issue (Banca d’ltalia, Banco di Napoli, Banco di Sicilia).

Further, the issue of a loan has been arranged, with the approbation of Parliament, for 1,000 million lire in redeemable obligations at 4.50 per cent, net yearly interest, issued at 97 lire per 100. The public subscription of this loan, patronised by a consortium of banks, under the leadership of Signor Stringher, the director-general of the Banca d’ltalia, will take place early in January.

The success of the operation seems yet solidly ensured, and it is facilitated by the convenient terms offered to the subscribers, among the others the possibility of getting from the banks of issue throughout next year an advance of 95 lire for every nominal 100 lire of stock deposited, interest at 4.50 per cent, yearly; and the exemption from the moratorium, now extended till March 31, 1915, off all sums withdrawn from the ordinary banks in order to subscribe to the new loan. The shares will be non-convertible and non-redeemable for 10 years, till January 1, 1925; during the subsequent 15 years the Treasury will provide the funds necessary for their extinction, which will be effectuated either by direct purchase of the stock, or by the means of a special sinking fund under the administration of the “Cassa Depositi e Prestiti”. It is probable that the new loan will find favour with the Italian agricultural classes, in which the number of persons having some money at the savings banks or in the proverbial wollen stocking has grown considerably in recent years.