For the Court of Auditors, Italy may smile for the short term, but austerity is expected in the future. The recovery prospects for the national economy are now at hand, thanks to the investments made possible by the Recovery – “a unique opportunity to increase the country’s growth potential” – but the path to return to the 3% deficit (report between national debt and GDP) is very rigid. For this reason, without a change of course on the current regulation of the European Union, after the post-pandemic recovery Italy will be under the squeeze of its accounts. In the 2021 Public Finance Coordination Report published today, the accounting judiciary drew a picture of the criticalities and opportunities of the Italian economy after Covid.
Also because, among the critical issues, there is the proliferation of fiscal expenses and differentiated treatments which significantly contributed to making the levy complex: “despite continuous commitments to limit their use over time, their number has continued to significantly increase “. For the Court, “these are exceptions to the general rule attributable to around 250 concessions, which cause a significant loss of revenue of around 53 billion in 2021. However, it is difficult to assess the overall impact, given the heterogeneity of the measures, by nature , purpose and share of the taxpayers concerned.
Confidence on the restart
The document takes up the main issues of public finance, with attention to the sectors most affected by the emergency crisis and the measures adopted by the Government to cope with it. For the accounting judiciary “The short and medium term prospects outlined in the Economic and Financial Document (Def) appear to be within the reach of our country”. A possible scenario despite the collapse from +0.3% of GDP growth in 2019 to -8.9% in 2020 of Covid: there will be recovery, also thanks to the National Recovery and Resilience Plan, and for the year in course is expected to increase by 4.5% of GDP with a recovery of almost half of the lost ground. “The implicit bet is on potential growth” is the direction indicated by the Court of Auditors, with public investments planned to be able to drive the economy. Not without structural reforms expected and the ability to make new investments in the name of infrastructural and environmental sustainability by private investments.
The “narrow” path towards the return of the deficit to 3% after the Recovery
According to the Court, “the Recovery Plan represents a unique opportunity to make investments that increase the country’s growth potential”. But not without reforms “long requested by all international observers” that focus on transparency and efficiency on justice, public administration, social safety nets and taxation. This is the strategy indicated to attract foreign companies and capital, to offer opportunities to young people – not just those who come out of a complete education course – and, in fact, to restart the Italian economy. “We must do everything possible, as soon as conditions allow it, to combine the expansion of the ‘good’ expenditure with the containment (and in some cases, to be identified through policy choices, the restriction) of the ‘bad’ one”. In addition to fighting tax evasion and reducing the tax burden on households and businesses. The objective indicated by the Court of Auditors would be to shift the taxation from income (Irpef) to that of consumption (VAT): “A necessary change, given that the next few years will require a considerable fiscal effort to meet the costs of the pandemic” .
Limits and criticalities of the state cashback
In terms of incentives towards consumption – and at the same time the fight against tax evasion – the analysis of the Court of Auditors then concerned the State Cashback initiative. Also including the receipt lottery, created together with cashback to encourage the use of electronic money: «It would seem that there are difficulties in monitoring the real economic and tax effects. The continuation of the Program – observes the Court – will have to find support in the complete knowledge of elements such as the evaluation of the effects produced in the various sectors concerned and the impact in terms of the emergence of previously hidden revenues and fees. No distinctions have been made between the goods and services that are the subject of the transactions and the subjects that render the service: it would seem preferable, for the diffusion of evasive phenomena, a solution that privileges payments to medium-small operators by providing a differentiated incentive. As for the minimum number of operations required in the half year for the payment of the reimbursement, it appears to be small, weakening the interest in using electronic payment ».
The burden of pension expenditure
On public accounts, according to the accounting judiciary, in the next two years, social security spending will be one of the most critical elements. The recent official projections of the GDP report are worrying, which show that in 2025 the accumulation of the medium-term effects due to the choices made with the “Quota 100” decree law and the reduction in GDP due to the recession will bring the indicator to a level 7 tenths of GDP higher than previously estimated (16 against 15.3 per cent). The need is that of a new reform, as confirmed by the Court of Auditors: “It seems clear that both for reasons of a structural nature – such as the aging of the population and the increase in the dependency rate of the elderly – and for reasons more related to pandemics, such as the reform of the social safety nets system, it is necessary for the sector to be the subject of careful consideration ».