The coverage problem
In unsuspecting times, in 2021, I had written several times about various problems related to real estate bonuses. The complete coverage of expenses – whatever they were – was generating a collective irresponsibility that increased the cost of each single intervention between two and nine times the costs of before or those of other European countries. The state paid so much, almost as if the state weren’t all of us. The concentration of authorizations on the most expensive buildings suggested who were the main beneficiaries of the debt that was being created: the richest. And the explosion of authorizations especially in Calabria (plus 1,000 percent compared to the previous “Ecobonus” at 60%), in Campania and Sicily (plus 600 percent) raised suspicions about the nature of certain organizations accommodated at this banquet.
The effects on the deficit
Giancarlo Giorgetti, now Minister of the Economy, expressed his impatience with the home bonus system in an interview more than a year ago (click here to read it). However, if the government has only now acted to block the use of tax credits as if they were currency with which one can pay and which can be transferred to others, it is because now there is something new. Eurostat, the European statistical agency, has presented Italy with a choice: enter the 120 billion euros of tax credits already generated in the deficits of this and the next four or five years; or write them to deficits in the previous years in which the tax credits were generated (between 2020 and 2022).
The only thing that was impossible was to keep making those costs disappear from the annual public finance balances.
The government has therefore chosen: the charges must be included in the accounts of the years in which the transferable tax credits were decided, between 2020 and the beginning of 2023. The deficits will therefore be drastically revised upwards from 2020 to 2023 and we will find out of years with deficits close to or above 10% of gross domestic product, levels from late before Republic.
An astronomical cost
It is a logical choice, that of the government, because it puts the costs where the bonuses have been generated. But Giorgia Meloni and Giancarlo Giorgetti they also did it for another reason: the cost of the transparency operation is so astronomical that the executive would have ended up in the cage of an excessive deficit procedure in Brussels for the whole legislature, if it had chosen to spread the impact accountant of bonuses for future years. I tried to explain the details in an article, for those who want to deepen these aspects.
About 35 billion credits in limbo
Unfortunately, however, the economic consequences of the superbonus don’t end here, actually they just start. And not only for the mass of tax credits generated, recognized or only hoped for, but which today are no longer usable to pay a construction company, nor can they be transferred by a company to a bank in exchange for cash. These are the so-called “problem” loans. The National Association of Builders (Ance) estimates this mass at 15 billion euros, but it is probable that another twenty billion of “substandard” loans are now in the hands of property owners: for a total of about 35 billion of credits from ‘tax today suspended in limbo.
Banks no longer know how to use credit
How do I tell? Because I read the final report (from last October) of the parliamentary commission of inquiry into the banks of the last legislature. The commission had the powers of an investigative judiciary, so it was able to obtain from Italian banks the information necessary to understand the phenomenon. Here they are. First point: last October the banks had already undertaken to absorb tax credits from real estate bonuses for 77 billion euros. Second point: the banks estimate that over the next five years they will pay direct taxes of just over 16 billion a year and 81 billion in all. Basically, for months Italian institutions have no longer been able to accept real estate tax credits in exchange for cash, because they know they no longer have a way to use them to reduce their future taxes.
Twenty billion credits in the hands of families
But since the tax credits already recognized are worth 120 billion (as my colleague Enrico Marro explains very well in this article on the Courier) and since the banks do not intend to absorb more than 80, here are 40 billion of bonuses stranded somewhere. Only 15 are in the hands of construction companies. But about twenty billion must be in the hands of families, even if it is assumed that the Italian Post Office has absorbed something.
Reactivating the transferability is a problem
But brace yourselves, because there is even worse among the consequences of this wicked measure. In fact, it is not easy to solve the problem simply by reactivating the transferability of credits or by widening the field of taxes from which to deduct them: it would cost the State too much. I try to explain why by recalling a few words spoken by Mario Draghi on 6 June 2019, when he was still president of the European Central Bank. He was asked what he thought of the «mini-Bots» proposed at the time by the League, as an alternative means of payment to the euro to be circulated in Italy (remember?). Draghi said: «The mini-Bots are either currency, and therefore they are illegal, or they are debt, therefore the debt stock rises. I don’t think there’s a third possibility.”
Problem loans increase debt
Now, the tax credits of the home bonuses have never had the same political purpose as the «mini-bots». They weren’t invented to prepare for Italy’s exit from the euro. But from a conceptual point of view they are no different from those “mini-Bots” that infuriated Draghi: they are debt issued by the state (in the form of lower future revenues) that can be used as a means of payment, that is, as a parallel currency to the euro. So those bonuses must be declared illegal by the ECB, or they go to increase Italy’s public debt stock and not just the annual deficit of the past budget years. Yeah, but when are they going to increase the debt? And above all: have we already estimated the impact of that twenty billion a year less taxes on public debt over the next few years that banks, construction companies and households will pay using tax credits? Are those huge numbers already in the debt expected and explained to Brussels or to the financial markets?
Public debt will struggle to come down
Hard to tell. Revenue forecasts in the latest “Update note” from the government indicate a ten-billion drop in direct taxes this year compared to 2022, so something of the bonus effect needs to be estimated. But between 2024 and 2025 the revenue rises by 5.5 and then another 11.5 billion a year. How is it possible? Yet we know that banks, businesses and households will pay tens of billions less in taxes, precisely because they will use those bonus tax credits. In short, something tells me that not all the costs of those measures have already been estimated and made visible in our future public accounts. We could therefore soon realize that perhaps our enormous public debt will have a hard time coming down in the next few years, despite the repeated and always disregarded promises to bring it back to more acceptable levels. And the Italian anomaly in Europe will remain.
The consequences for the GDP
Unfortunately, however, there is a further issue to be carefully observed: the immediate consequences for the gross domestic product (GDP) of having interrupted the supply of this very expensive drug to the economy. As straw rekindles the fire, so the home bonuses have undoubtedly given a boost to growth in recent years. In 2021, the turnover of the construction sector grew by 14 billion compared to the previous year, according to Istat, up to around 5% of GDP; professional services turnover (including surveyors and architects) also grew by 10 billion. If we imagine that the halt to the superbonus model reduces these sectors by even just 10% compared to 2022, there would be enough for Italian growth in 2023 to remain nailed to zero. Not more. Mine is not a forecast, but this is an undeniable risk: one more to account for the most incredible collective economic policy error in recent decades.
This article was published in the Corriere della Sera newsletter «Whatever it takes», click here to subscribe.