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The Economist

Absolute Government in Italy – Taxes to be simplified -Working of the Succession Tax – A New Excise?

«The Economist», 2 dicembre 1922, pp. 1032-1033

 

 

 

Turin, November 27

 

 

The first financial acts of the Fascist Government are promising. They have abolished useless train services in the State railways, and declared their intention to drop many Royal decrees instituting port authorities in minor ports, which would simply have expanded into a new bureaucracy, additional to the State, municipal, and other authorities governing the port administration. But the most important act of the new Cabinet has been its demand for provisional powers to collect and expend revenue (esercizio provvisorio) till June 30, 1923. The Chamber has readily assented, and the Senate will do likewise. The Government is thus empowered to act as if the budgets had been regularly discussed and voted by Parliament. Moreover, the Chamber has passed the so-called Bill of full-powers. The Senate will certainly concur.

 

 

This Bill authorises the Government until December 31, 1923, to reform the civil and military services; to suppress this or that public service; to transfer railways and the other industrial State concerns to private hands; to reduce, simplify, or increase existing taxes, and to introduce new ones; to act as they will in the domain of public administration and finance. Never was such absolute power entrusted by a Parliament to the Executive. Even in time of war there were limits to the free action of the Government. This time the only limit set to the absolutism of the Government is the duty to report before March 31, 1924 – a vague and ineffectual limit, as Parliament will not be called to give a vote on such a report.

 

 

The renunciation by Parliament of all its powers for so long a period was received with general cheers by the public. Italians were sick of talkers and of weak executives. The general feeling is one of profound distrust towards Parliament. Men would accept a Czar for the sake of getting out of chaos. In finance this revulsion against political talk, abuses, tricks, and so on ought to have been a revulsion against bureaucracy. The excessive taxation, the system of piling tax upon tax, the demagogic persecution of savings and capital by taxes up to 100 per cent, of income or capital – all this was characteristic of the war and post-war period, when the Chamber was never asked to vote on financial bills, but decree followed decree on the initiative of the Government. But people who are sick of a given state of things frequently seek remedies at the source of the evils of which they complain. Oppressed by the absolute rule of an old, ineffectual, compro­mising, sceptic set of politicians, they hope for redress from another set of politicians, young, energetic, full of vigour and of patriotism. True, there was little to hope for from the dying Chamber. Moreover, most of the new Ministers are capable men, truly desirous of doing well. Signor De Stefani, Minister of Finance, has not announced a big programme, as did several of his predecessors, who went out of office with nothing done. He is professor of political economy at the Venice High School of Commerce, and has declared his intention of simplifying and consolidating taxes, increasing their yield not by putting rates up, but by prosecuting defaulters. If new taxes must be imposed, for every penny of new taxes a corresponding saving ought to be made in the public expenditure. His only definite disclosure was that the succession tax is to be reduced. It was high time that from the Government bench a voice should be raised against the frenzied finance of the Bolshevist after-armistice period. A few examples will suffice to give an idea of what this system meant:

 

 

 

Inheritance of Each Heir or Legatee

 

Property Passing From

 

 

 

 

Lire

 

 

 

Pound Sterling at the Rate

of 100 Lire to £1

 

 

Fathers and Mothers to Sons

Grandfathers to Grandsons and Others in Direct Line

 

 

Husband to Wife

 

 

Brothers to Sisters

 

 

Uncles to Nephews

 

 

First Cousins

 

Other Relatives

and Strangers

    % % % % % % %
5,000

50

1-80

1-80

5-40

9-60

12

14-40

22-80

100,000

1,000

4-80

6

12

18

21-60

32-40

48

500,000

5,000

10-80

12

19-20

25-80

28-80

39-60

62-40

1,000,000

10,000

16-80

18

26-40

32-40

36

48

70-80

5,000,000

50,000

21-60

25-20

32-40

39-60

45-60

57-60

78

10,000,000

100,000

25-20

28-80

36

43-20

50-40

62-40

81-60

20,000,000

200,000

28-80

32-40

39-60

46-80

54

67-20

86-40

more than more than  

20,000,000

200,000

32-80

36

43-20

50-40

57-60

72

90

 

 

On top of this there was a) a tax of 0.75 per cent, on the land and houses included in the inheritance, b) A tax of 6 per cent., 9.60 per cent., and 12 per cent, of the heritage, when it falls to an heir or legatee, not the son, husband, or wife of the deceased, who receives more than 200,000 lire, and is possessed in his own right of an estate of more than 200,000, 400,000, and 600,000 lire respectively. When the maximum rate of 90 per cent, is due from a second cousin, and the rules under a) and b) are working at their maximum, the inheritance is subject to a rate of 102.75 per cent., which is manifestly unthinkable. Moreover c) if the estate is subject to a life interest, the remainder-man is bound to pay the succession tax at once on the half of the full value if the usufructuary is under 50 years of age, and on three-fourths is over 50. If, as frequently happens, a husband without sons makes his wife a life-usufructuary, and leaves the estate to a nephew or a cousin, the tax to be paid at once swallows up, with the accrued interests on the tax, the whole value of the succession. Therefore, latterly many heirs have been compelled to refuse to take advantage of wills in their favour, d) There is added to the estate 7.10 per cent, of the gross sum – before deduction of the debts – for jewels and furniture; e) funeral and other expenses are deducted at the rate of 1 per cent, on an estate from 10,000 to 100,000 lire, and of 0.50 per cent, from 100,000 lire upward; f) debts are deducted only when bearing a certain publicly registered date. Most debts are therefore not recognised as such, and the heirs have to pay the tax on them. Such was the old system. The announcement made by Signor De Stefani that the Government intends to reduce rates all round was greeted with relief by many families, menaced with ruin.

 

 

On new taxes Signor De Stefani spoke cautiously. He seemed to be favourable to a new excise capable of bringing into the tax-gatherers’ net the great masses of agricultural and industrial workers, who are not subject to any direct tax on income. Except for the higher classes of workers, whose wages are over 25 lire per day, direct taxation is practically impossible; the only substitute is an excise. Wine is already taxed at the rate of 20 lire the hectolitre. As the internal price is over 200 lire, a higher rate would not be unbearable. There is much talk of the re-establishment of the flour tax, but the old flour tax (macinato) has left so bad a record that it is doubtful if even a strong Government dare reimpose it.

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