A proposal for Emilia-Romagna
On June 2 we celebrate the Republic and we remember the importance of our Constitution, which in article 1 assigns sovereignty to the people and in article 117 point "e" assigns exclusive competence over money to the State. But in article 3 of the Constitution it clarifies that "It is the duty of the Republic to remove the obstacles of an economic and social nature which … prevent the full development of the human person …".
In the light of the current flood emergency situation in Emilia-Romagna, we have drawn up a concrete and feasible proposal perfectly in line with the Constitution, to immediately find the necessary resources for the interventions necessary to bring the inhabitants of this region back to normal life and the territory in conditions of greater security.
Below is the complete text of the proposal which was sent to all the mayors of the municipalities concerned, to the President of the Emilia-Romagna Region, to the highest national institutional offices, to the Government, to the Minister of the Economy, as well as to all the Chamber of Deputies and Senate.
Who wants to support this proposal and maybe send it to politicians, local administrators, trade associations, journalists, etc… who know each other, this is the link to download the document to attach: https://drive.google.com/file/d /1BS6Gjz1mloMkX6Sf8pj5TMUlwAarC5cX/view?usp=drive_link
“The flood in Romagna brings up once again the theme of how the State can and must intervene to help a population damaged by similar events. Everyone has now understood that money is created today and in large quantities to save banks or financial markets, but then it could also be created to deal with emergencies in the real economy that affect the population and businesses.
Here we want to put forward a concrete and feasible proposal to immediately find the necessary resources to deal with this situation, with the aim of returning the inhabitants of that area to normal life and in conditions of greater security than today. Financial resources are needed for:
– compensate the victims, both families and companies, for the costs they will have to incur to restore what has been damaged or destroyed;
– carry out ordinary maintenance of the canal and river system, in order to verify and increase its efficiency and safety;
– identify those extraordinary works to improve the flow of rivers, the tightness of the banks and any works to vent the excess flow that cannot be disposed of during a possible meteorological event.
Past experiences have shown us that the identification and procurement of resources by the State has always been lacking, slow and inconclusive, so much so that we are still witnessing today entire countries affected by earthquakes that have not yet been rebuilt, flooded or collapsed areas not yet put in security, with the real risk of repeating these disastrous events.
Where can the State find the necessary resources?
Surely solutions that take away money otherwise destined for other sectors to divert it in this emergency are to be excluded, because we risk plugging a hole, opening another one. But neither should we continue to borrow money from the financial markets or from the European Union, because in any case it will have to be repaid in the future and with interest.
This is the typical case in which the necessary money can be created specifically to solve the problem without generating new debt, so as to guarantee the restoration of the conditions of economic productivity of this territory, which otherwise will in any case generate a hole in the State budget, due to the inevitable loss of future revenue.
How can the state create the necessary resources?
Considering that this is a highly productive area capable of generating tax revenue for the state, it is the ideal situation to use the tax credit, i.e. an instrument that anticipates a reduction in the payment of future taxes to date. Given that restoring the recognized production capacity of this Region will make it possible to continue receiving tax revenues that would otherwise be compromised, the State can now advance a tax credit that has the characteristics to allow payment for the necessary works.
Tax credits are defined by Regulation n.549/2013 (SEC 2013) as "payable", when the State undertakes to reimburse them even in the absence of a tax debt, or "non-payable" or "lossable" when they can only be offset with a tax debt. The new version of the MGDD 2022 Deficit and Public Debt Manual, edited by Eurostat, has extended the definition "payable" also to the new non-refundable tax credits, if they are transferable, carried over to subsequent years and/or used to offset any debt to the State, because the probability that they are "losable" is reduced.
Therefore, if the State issues a tax credit that can be transferred to everyone infinitely, which can be carried over to subsequent years without ever expiring and which can be used to offset any debt to the State, it must be considered "payable" and according to the ESA 2013 it must have the following accounting treatment in the preparation of the state budget:
- it must be considered an expense when it is issued, increasing the deficit, but never having to be "paid", it does not generate any cash outflow;
- it is not included in the calculation of the public debt, which for Italy is the biggest problem, because it never generates any present or future financial obligation, but only a reduction in future tax revenues, offset by higher tax revenues in the early years.
A proposal for Emilia-Romagna
In practice, the State provides the citizens of this Region with a payment instrument accepted by all and exchangeable in euros both by banks and financial institutions, and by companies with adequate fiscal capacity. A payment instrument which for the State does not imply any cash outflow and any increase in public debt, but only an anticipation of the future loss of revenue that will exist anyway if no action is taken. It is therefore a convenient measure for the State and certainly decisive and fast for the population and for the companies concerned.
Among other things, the Government, in the conversion into law of Decree Law no. 11 of 2023 which no longer allows the transfer of tax credits for future interventions, approved paragraph 3-quater of article 2, introducing a derogation for properties "damaged by seismic events" and "damaged by meteorological events that occurred after 15 September 2022 … located in the territories of the Marche region".
Our proposal is that the Government immediately approve a new Decree Law to extend the derogation also to interventions in the flooded areas of Romagna, perhaps improving the tax credit with all the features envisaged by the new version of the MGDD modified by Eurostat: transferable to all infinite times, which can be carried over to subsequent years without ever expiring and can be used to offset any debt to the State, perhaps in a single installment after 2 or 3 years, because it is sufficient time to generate an increase in tax revenue for the work carried out.
This proposal of ours is addressed to the Government, but will also be forwarded to the Mayors of all the Municipalities affected by the flood."
List of signatories: Antonino Galloni, Carlo Freccero, Fabio Conditi, Prof. Filomena Maggino, Francesco Carraro, Galileo Ferraresi, Giovanni Lazzaretti, Guido Grossi, Ilaria Bifarini, Marco Cattaneo, Prof. Paolo Becchi, Paolo Tintori, Prof. Roberto Caria, Stefano of Francis.
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The article A proposal for Emilia-Romagna comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/una-proposta-per-lemilia-romagna/ on Fri, 02 Jun 2023 08:00:49 +0000.