All the flaws of the Superbonus 110%. Reuters report
That's why, according to Reuters, Italy's construction boom, "drugged" by Superbonus 110%, hits a wall
Last year, innovative home redevelopment incentives revived the Italian construction sector, boosting the country's economy and attracting international acclaim. A few months later, everything is about to end in tears.
The complex system of negotiable tax credits that gave the industry momentum stalled, as the government put in place a squeeze due to suspected fraud, leaving builders unpaid for their work.
Builders and a business lobby group are warning of tens of thousands of bankruptcies and layoffs that could drive Italy's weak economy into recession.
Companies that have not been paid for about seven months have also stopped paying suppliers and consultants, in a domino effect that has involved thousands of businesses and workers, writes Reuters .
"We are headed for disaster, not just for the construction industry, but for the entire economy," says Norbert Toth, whose construction company in the central coastal town of Formia has laid off 20 of the 30 workers it had six months ago. .
The crisis is already starting to emerge in the official data.
Construction production fell in April for the first time in nine months, construction industry confidence in May was the lowest in six months, and the construction purchasing managers index was the lowest since January 2021 Potentially at risk are also some of the 200 billion euros of pandemic recovery funds that Rome must receive from Brussels. A condition for disbursement is that Italy will almost double the energy efficiency of buildings by 2025, which could be jeopardized without the incentives.
LIQUIDITY CRISIS
The much vaunted programs launched in 2020 have turned into an all-Italian story of inventiveness, fraud and bureaucracy.
Toth, 39, is the cofounder of a group called the National Construction Class Action, in which hundreds of small construction companies like his message each other and lobby politicians to try to keep incentives alive.
Some companies, desperate for liquidity, offer to sell tax credits worth tens of thousands of euros at huge discounts, up to 50%.
Under the more generous scheme, known as the "Superbonus," the state paid a staggering 110% of the costs to make buildings more energy efficient, from insulation to solar panels to replacing old-fashioned boilers and windows.
The system allowed homeowners to deduct the cost of construction work from their taxes for a period of five years, or to sell the tax credit to the builder as a form of payment.
The builder could then sell it at a discount to another firm or a bank, which in turn could resell it to another, like any other financial instrument that provides liquidity to the system.
IMPULSE TO GROWTH
Despite the red tape and frequent tweaking of the rules, the program looked like a smash hit.
The long-stagnant Italian construction sector contributed 0.9 points to last year's 6.6% economic growth.
In November, the European Commission's Construction Observatory called the Superbonus "a very successful measure" and recommended its extension to a wider range of buildings. Other European countries, including Germany, Spain and France, have offered their subsidies for ecological home improvements, although none have been as generous as Italy.
At the end of last year, the tax police said they had discovered a suspected fraud of over € 2 billion linked to incentives for green building, including, in small part, the Superbonus.
This caused an alarm bell to sound among politicians and Prime Minister Mario Draghi began to harshly criticize the measure, introduced by the previous administration and renewed by Draghi. "We disagree with the Superbonus," he told the European Parliament last month, in an unusual case in which a government criticizes one of its own policies.
Draghi said it not only generated scams, but also increased costs because customers, knowing they would be reimbursed, did not need to haggle with manufacturers about pricing.
Industry Minister Giancarlo Giorgetti said that the system "drugs the sector and contributes to inflation".
This claim is not supported by Eurostat data, according to which construction cost inflation in Italy in the fourth quarter of last year stood at 5.5%, well below the euro zone average of 8.9%.
STRONGER RULES
From an anti-fraud perspective, Draghi set limits on the number of times tax credits could be sold from one bank or company to another, undermining the mechanism on which the scheme was based.
Regulatory uncertainty and hostile comments from ministers hit confidence and, one after another, the country's largest banks stopped buying tax credits from customers and builders, leaving them without money for their work.
“More than 33,000 companies risk bankruptcy with a loss of 150,000 jobs,” says Claudio Giovine, head of the economic analysis of the Italian small business lobby CNA. A survey conducted this month of group members showed that 60,000 businesses run out of cash because they failed to sell the tax credits they had accepted as payment for the work.
According to CNA estimates, these blocked loans amount to more than 5 billion euros. As a result, according to the survey, 50% of businesses are delaying payments to suppliers, 30% have stopped paying taxes and 20% are not paying workers. Nearly 50% said they risk having to close the business.
The possibility of last year's boom turning into a real crisis depends on the decisions that will be made in the coming weeks. With an already stagnant economy, alarmed Italian parties have presented numerous proposals to Parliament to relaunch the Superbonus.
Among these, the extension of the type of businesses to which banks can sell their tax credits, including small businesses with a turnover of more than 50,000 euros, and the possibility for banks to use the credits to purchase government bonds. . Whether such ideas are acceptable to Draghi remains to be seen.
Construction firm owner Toth said industry data over the summer will be "terrible" and that the only way to save the system is to restore unlimited marketability of tax credits, while acknowledging that some firms may violating the rules.
(Extract from the foreign press review by eprcomunicazione )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/tutte-le-magagne-del-superbonus-110-report-reuters/ on Sun, 26 Jun 2022 05:32:16 +0000.