Superbonus 110%, because the real problem is the tax credit
Superbonus: the government decree and the crux of the tax credit. The post by Luigi Marattin, economist and deputy of Italia Viva, taken from his blog
1) WHAT ARE WE TALKING ABOUT THE 110% SUPERBONUS?
No. Or at least, not only. The main problem has never been the 110 mechanism (on which you can think as you like, it's not today's topic), which by the way is now 90.
2) AND WHAT ARE WE TALKING ABOUT THEN?
The possibility of freely circulating the "tax credits" that the government grants.
3) EXPLAIN YOURSELF BETTER, WE DON'T UNDERSTAND
The government basically has two ways to get money into people's pockets:
a) Give them to him directly
b) have them deducted from the taxes he pays each year (i.e. grant a tax credit).
Option a) has always been more complicated due to obvious organizational problems: only recently have technology and the crossing of databases made it possible – from Covid onwards – to direct credit to a current account, in some cases.
Option b) – the tax credit – has always been easier, because it is automatic. And also for another reason, which it is good to pay attention to because it is the heart of today's problem.
4) AND WHAT IS IT?
When the government wants to give a benefit of 100 euros – and chooses the tax credit – it usually deducts them from taxes over a period of several years. For example, 20 euros a year for 5 years. In this way the public finance impact (on the deficit and on the debt) is not concentrated in the year in which this relief is granted but spread over five years. Instead, if you choose option a) – the direct transfer – the 'public finance impact is there for the entire first year.
5) Okay. LET'S GET BACK TO THE PROBLEM THEN.
However, the tax credit – i.e. deducting the tax benefit – has a potential problem for the beneficiary: if he does not have enough taxes to pay (for example because he has a low income), he does not have enough "tax" from which to deduct the " credit".
For this reason, since well before the Superbonus season, governments have always experimented with limited "invoice discount" or "credit transfer" experiments.
6) WHAT DO YOU MEAN?
Let's imagine an action that costs 100 euros, and that the government wants to give me half the cost (= 50 euros). Instead of me deducting it from taxes within the next five years, he can allow the company that does the job to pay me 50 euros directly (that is, he applies the discount directly on the invoice). It will then be the company that will arrange with the State to be reimbursed that remaining 50, probably deducting it from its taxes. Or, in a completely equivalent way, I can pay the full cost of my action (= 100 euros).
At that point I have a tax credit from the government (= 50 euros), which I can however sell to Marco. So I immediately get back the 50 euros, and Marco will make do with the state to get that credit repaid, probably heating it up from his taxes. Until 2020 this possibility was granted in a limited way, for an obvious reason: circulating tax credits too freely would in fact have created an alternative currency, with potentially dangerous implications.
7) ALL CLEAR. BUT, WHEN DO YOU GET TO THE POINT?!
Here I am. In 2020 the Conte II government – together with the introduction of the Superbonus 110% – decided to make all tax credits relating to building subsidies freely salable (and without any type of control).
So not only the Superbonus 110, but also the facades bonus (90%), those at 50%, 65% etc.
8) AND WHY?
Because the Five Star Movement was convinced of the need to create a complementary "fiscal currency" to the euro. A scoundrel that they had read on conspiracy blogs, without any economic foundation. Just one of the numerous scoundrels we had to suffer in those years. Some of us tried….
9) STOP STOP. WHAT DO YOU KNOW ABOUT IT?
I was the majority rapporteur of the Relaunch Decree in May 2020, the one in which this rule was contained.
10) Okay. DID YOU SAY?
Some of us tried to explain that this mechanism was very dangerous, because once you start with something like this you know where you start and you don't know where you end up. But the Five Star Movement – as it often did in that period – weighed the fact of being the relative majority party, and said that for them that provision was a condition for approving the entire decree, which contained tens and tens of billions of aid in the darkest moment of Covid.
11) AND THEN WHAT HAPPENED?
There were essentially two problems. The first is that – given that the transfer of building tax credits was totally free and without any type of control – someone thought it best to take advantage of it, starting to circulate (even with quite simple mechanisms) credits non-existent, against which, however, he collected money.
The interception of that criminal who said to his buddy "oh, the Italian state really likes to be fooled" is famous.
He didn't say "cheat", but I think we understood each other.
The most recent reports from the Guardia di Finanza and the Revenue Agency speak of several billion in fraud against the exchequer. To try to plug this problem, the Draghi government initially greatly restricted the possibility of freely transferring credits, and then tried to re-extend it a bit, in a ballet that did not do any good for the certainty of the rules but which turned out to be indispensable once the initial damage had been done.
1 2) AND THIS IS THE FIRST PROBLEM. AND THE SECOND?
The second is that at a certain point Eurostat, the European Statistical Institute which determines the public accounting rules throughout the Union, showed up (NB. To understand this point well, keep the answer to question 3 close at hand) here above) and said:
"Excuse me for a moment dear. If you want to spread the cost of the 100 euro subsidy over 5 years, you have to get businesses and households to deduct them from taxes, 20 euro a year for 5 years. In other words, the accounting representation must mirror what really happens”.
“If, on the other hand, you make that 100 euro credit circulate freely as if it were money, then it means that those 100 euros represent an obligation in any case payable by the Italian state. It is as if it were a transfer, and therefore you have to record it in full for the first year in the public finance accounts".
13) AH BUT. AND WHEN DID EUROSTAT SAID THIS?
Definitely last week. But he had been issuing very clear warnings on the matter for several months.
14) SO WHAT?
It is exactly for this reason that the government took last night's decision. Which is as follows: for past tax credits, oh well, peace. If Eurostat makes us put them all on the 2021 and 2022 budget, it's almost even better, because it makes my deficit worse in years when the EU fiscal rules were suspended, and it lightens it in the following years.
But for the future we are not joking: for new jobs, the tax credit is no longer given. That is, let's go back to pure option b) of the answer to the third question of this post: that is, you deduct them from taxes.
15) AND WHAT CONSEQUENCES DOES THIS DECISION HAVE?
It's not just the building bonuses that lose the opportunity of the sale, but any other tax credit. That is, every "action" that will be carried out from now on and for which a tax credit is valid, can only be used as a deduction.
At the same time, due to the past mass of tax credits relating to building bonuses (i.e. works already carried out), the government tries to encourage their circulation by issuing interpretative rules which – once again – try to better establish who is responsible when buying and these credits are sold (if they hide scams and do not actually carry out work).
CONCLUSION :
Unfortunately in economic policy (and perhaps also in life) when a serious mistake is made, all possible subsequent actions to remedy it are never the optimal ones: in fact, the initial mistake is too serious and conditioning.
This story of building bonuses is exactly that, nothing else. For this reason, before trying together with my party to evaluate the government's move and try to improve it, this morning I just feel like saying that those responsible for that serious mistake – the Five Star Movement – should at least have the decency to remain silent.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/italia-viva-ecco-perche-il-vero-problema-non-e-il-superbonus-110/ on Sun, 19 Feb 2023 07:41:03 +0000.