Italian finance

To the Editor of The Economist

«The Economist», 21 marzo 1908, p. 617

Sir, – The note on relief for Italian taxpayers which you publish in your issue of March 7^th is subject to some criticism. While it is correct to say that the large surpluses of recent years have been mainly devoted to public works, the increase of the salaries of civil servants, and to the cost of national defence, it is to be added that the money so applied has been in the main squandered to satisfy petty interests, and it is not correct to consider as certain a reduction of taxation. As yet no definite scheme of tax reform has been made public by the Government, and it is highly probable that no such scheme will be this year seriously laid before the Parliament. Or if it is laid, that will be done only with a view to win the votes of the constituencies at the next general elections. The reason is not far to seek; the huge surpluses of the last years have been swallowed by the increased expenditure, so that nothing is left for the taxpayers. A statesman of high standing (probably Mr Sidney Sonnino, formerly Premier, who, it is to be observed, is not a regular opponent of the present Government) has published in one of the last numbers of the Nuova Antologia, the leading Italian review, a critical examination of the Italian budget, and has shown clearly that the surplus of which the Minister of the Treasury was so boastful in his Esposizione finanziaria of November last, was a fictitious surplus. Some days ago Mr Rubini, the president of the Giunta generate del Bilancio (Committee of the Chamber of Deputies on Ways and Means) resigned, thinking it to be his duty to warn the Parliament and the public opinion as to the way the public accounts are manipulated. It will suffice to quote only one instance of this manipulation: the account of the State railways for the year 1906-07 is made to close with a surplus of 50 million lire; but this result is obtained by the device of putting some 10 million lire of ordinary expenses to the charge of a reserve fund, which should be devoted only to expenses of extraordinary character. From the residue, 40 million lire, other vast sums should be deducted if the accounts were regarded from the point of view of a joint-stock company and not made up with a view of deluding the taxpayers. But the Government think necessary to muster a surplus on State railways of 50 millions, as a minor sum would have brought too rudely to the mind of the public – firstly, the fact that the general surplus is not so great as was said; secondly, the necessity of a severe administration, even by the State railway; thirdly, the fact that the State railway cost for interest and sinking fund of a part of the public debt a sum vastly greater than the so-called surplus.

The Italian public finance and the economic development of Italy are to-day extremely interesting. But I fear that the correspondents of English journals do not convey a true idea of it to their readers. – Yours truly,

Luigi Einaudi

Turin, March 9, 1908.