Italy. The crisis abates. Fascisti in Genoa. Italy’s national wealth and taxes

«The Economist», 9 settembre 1922, p. 432

Turin, September 5

When I last wrote (August 2^nd) Italy was approaching a crisis. The Facta Ministry was hurriedly reconstituted to meet the growing danger from the Fascisti. There were indeed rumours that the Fascisti were to march on Rome to dissolve Parliament and set up a dictatorship. The rumours proved, as generally in Italy, unfounded. The Government laid on the military authorities the duty of maintaining order in the disturbed provinces; and all ended in nothing. The country is to-day peaceful and contented. The Chamber has given a large vote of confidence to the same Facta Ministry, of which it endeavoured to get rid a few weeks before. The great topic to-day is the General Election. The Fascisti claim that their representation – about 20 Deputies – is too small; that the trend of public opinion is against Socialism and in their favour. Therefore a General Election is due, notwithstanding that the Chamber is only one year old. Liberals and Democrats hesitate, and say that the proportional system should be abolished before going to the constituencies. Proportionalism was undoubtedly favourable to the great mass parties, i.e., Socialists and Populars, and fatal to the old non-organised Liberal parties.

Meanwhile, under the pressure of Fascism, Municipal-Socialist and Communist councils are resigning or being dissolved; first among them, the Socialist council of the great northern capital, Milan. Socialist administration in Milan was of the worst species. The number and salaries of public employees were raised without regard to economy and even decency, and the city was almost bankrupt. The cry for economy in State and local Budget is at last loud, and we may hope that a new era of retrenchment is in sight.

Another result of the Fascist movement is the dissolution of the authority of the Port of Genoa (Consorzio del Porto di Genova). On August 5th, Palazzo San Giorgio, the magnificent old building where the Genoa Conference sat, was occupied by Fascisti. Senator Ronco, president of the Port Authority, was compelled to sign a series of decrees dissolving the monopolistic Socialist cooperatives of working men, to whom the operations of the port were entrusted, and was ultimately compelled to resign. The closed lists of the workers (all Socialist) authorised to work on the port were reopened, and new nationalist workers admitted. True, the cost of operations in the Genoa port were going up, but it is doubtful if this was due more to the high wages paid to monopolistic red co-operators than to the exactions of various classes of middlemen bent upon squeezing the utmost farthing from every ton of merchandise passing through the great Italian port.

Signor Matteotti, M.P., has presented an interesting report to the House Committee on Finance. The following table gives the yield of State taxes before and after the war:

Even leaving out of account the extraordinary taxes (excess profit taxes, war income-tax, exceptional increase of capital levy) the tax yield increased more than five-fold, and, including extraordinary taxes, more than six-fold.

The increase was highest on transactions and consumption, almost from 1 to 6, while the direct taxes on income and capital increased less than 3  fold. But if we add to the ordinary taxes on income the extraordinary taxes, we see that the increase of direct taxes was from 607 to 4,170 million lire, or almost from 1 to 7. Thus all classes of taxpayers are to- day more severely hit by taxes than before the war. The Lira has depreciated from 1 to 0.21; but taxes having risen from 1 to 6, the real burden is increased by 50 per cent. And we are only at a beginning. A report by Signor D’Aroma, Director-General of Direct Taxes (on income, capital and wealth) to the Ministry of Finance is illuminating. Our most productive ordinary tax is called imposta di ricchezza mobile, and corresponds closely to your income-tax, except in so far that it leaves out, for separate taxation, net rents accruing to land and house proprietors. The total income assessed to the imposta di ricchezza mobile was in 1918 only 2,030,774,117 lire. In 1921 it rose to 3,974,277,318 lire, and in 1922 to 6,002,747,033 lire. This huge increase signifies that more and more incomes are brought into the fiscal net. The administration, somewhat lax before the war, is becoming more and more severe. Signor D’Aroma hopes to the able, in a few years, to increase assessed income considerably. He observes that only 1 billion lire annual income is assessed to the land tax, 0.8 to the house tax, 6 to the income-tax (ricchezza mobile), 4.5 to the direct income- tax (income-tax on State servants’ salaries and other incomes paid by the Government, which are not assessed, but directly taxed at the source), making 12.3 billion lire of income assessed and taxed. The true national income is much higher, and cannot be estimated at less that 60 billions lire. Italy, it is true, is a country of small incomes, which should be exempt from direct taxation; but if 30 out of 60 billions are small incomes, rightly exempted, there is a long distance between 12 billions taxed and 30 billions which ought to be taxed. Even allowing for 6 billions legally exempt (interest of public debt issued under the clause of tax exemption and other similar items), the administration has a large virgin soil left to till to the benefit of the exchequer.

One potent cause of tax evasion, however, is the extravagant method of putting up tax rates, so that the taxpayer is bound to minimise the income assessed to save himself from utter ruin. Land income assessed is only 1 billion, but upon this paltry sum is laid from State, Provinces and municipalities a tax burden of 876 millions lire. A rate of 88 per cent. cannot be paid; the only way of escape for the taxpayer is to understate his assessed income. The burden of the house tax is 639 millions lire.