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Treasury Bonds Issue – Sinking Fund – Taxation Problems -Economic Indices – Balance of Trade – Emigration

Tipologia: Paragrafo/Articolo – Data pubblicazione: 20/06/1931

Treasury Bonds Issue – Sinking Fund – Taxation Problems -Economic Indices – Balance of Trade – Emigration

«The Economist», 20 giugno 1931, pp. 1327-1328




Turin, May 27



The subscription to a 4,000 million lire issue of 5 per cent, nine-years Treasury bonds at 95 was closed with a total subscribed of 7,000 millions – a very remarkable success. The issue is intended for repayment of 3,807 million lire 5 per cent, bonds, due on November 15, 1931. The new bonds are very similar to the old ones, carrying the right to a greater number of yearly premiums, viz., eight of one million lire each, eight of half a million, sixteen of 100,000 lire, etc. Old bonds sold before the issue at 99.50 and bearers were entitled to exchange them for the new ones with a refund of five lire. As the issue was over-subscribed, the excess will be used to ease the situation of the Treasury. How the crisis has influenced it can easily be seen from the following figures (in million lire):





June 30,


June 30,


June 30,


April 30,








Redeemable debts





Treasury current debts













What is the use, except the moral one, of maintaining an appropriation of 300 million lire for sinking fund purposes when the total debts are increasing? The sinking fund system was changed when, instead of the appropriation of the budget surplus, which according to our accounting methods is not always a cash surplus, the fund was allocated a share of the yield of the tobacco monopoly. From May 1, 1930, however, when tobacco prices were raised by an average of 23 per cent, so as to give the desired sinking fund surplus, consumption decreased by an average of 16 per cent, so that no surplus was forthcoming. Together with similar experiences with spirits and sugar, this is a proof of the old truth that low rates are frequently more beneficial to the Treasury than high rates.



A campaign is being conducted at present in favour of a reduction of the wine tax, which is said to check consumption. More than five million hectolitres of the 1929 vintage are today still to be disposed of, together with 12 million hectolitres of the 1930 vintage. It is alleged that this is caused by the wine tax, levied at rates varying from 45 to 76 lire per hectolitre. Abolish it, it is urged, and the wine will be sold at an average price of 100 lire and bring 1,700 million lire to the needy wine growers. The difficulty is to find an alternative source of revenue. A 12 per cent, tax on the sale value of all textiles is suggested in certain quarters but it is strongly objected to by cotton and wool and silk manufacturers. Moreover, this tax was tried during the war and was abolished by the present Government in 1923, since it was dangerously damaging a principal branch of Italian industry. Another suggestion is the re-establishment of the flour tax, which was one of the relics of the old Italian States prior to unification and which was abolished in 1884. The existence of the flour tax was one of the chief reasons for the unpopularity of the Governement which fell in 1876. From the fiscal point of view the flour tax is certainly better than the customs duty on foreign cereals; because the flour tax would hit the whole 7.2 million tons consumed, whereas the duty is paid only by the 2 million tons imported. If 600 lire per ton are needed as customs duty for obtaining a given result, 170 lire would suffice as flour tax. What is suggested, however, is a flour tax not as an alternative to the custom duty but as a complementary tax; in which case the price of the loaf would be increased, to the detriment of the yield of some other tax.



It is probable that we have reached the limit of taxation. Professor Mortara, in the last chapter of his “Prospettive Economiche” for 1931, which are truly becoming an indispensable handbook for the study of Italian and world economic conditions, makes a well-balanced estimate of taxation incidence in Italy. In current lire the total (state and local) tax yield was 9.2 billion lire in 1913, 14.9 in 1925-26, and 22.5 in 1930-31. If the figures are translated into lire of constant purchasing power, total taxation amounted to 12.3 billion lire in 1913-14, to 14.9 in 1925-26, and to 29.5 in 1930-31. Against a national dividend which is presumably not increased, this increase in taxation looks formidable indeed. Professor Mortara concludes that the moment is certainly not favourable to a reduction of taxation, but as, in 1926, Signor Mussolini checked the depreciation of the lira, when such an achievement seemed out of the question, it is similarly imperative and possible for him to give the lead to the needed reduction of public expenditure.



Bourses are lifeless, with no encouraging features. Economic indices do not yet give any sign of the end of the crisis. State railways yielded in the first four months of the present year 405 million lire for passenger traffic, as against 468 in the corresponding months of 1930 and 714 million lire for goods traffic as against 927. Passengers carried in April were 7.6 millions against 9.3 millions in April, 1930. Goods maritime traffic is also decreasing. Passengers, however, increased; 355,300 were landed against 344,900 in April, 1930, and 353,600 sailed against 336,000 in April, 1930. This is important, as foreign visitors were always a most important credit item in Italy’s international balance of payments.



The excess of imports over exports is also decreasing; it was 983.4 million lire in the first four months of 1931 as against 1,944.6 million lire in the corresponding period of 1930. Though the decrease is useful from the point of view of the present balance of payments, it is of mixed meaning for the future, as it may mean a reduction to the minimum of purchases of raw materials. The General Industrial Confederation has made a very elaborate analysis of the official statistics with interesting results. Taking as 100 the average for 1925 and studying variations of quantities, exclusive of prices, they find that imports of raw materials increased to 116.8 in 1929 and decreased in 1930 to 102.07. In February, 1931, they had further decreased to 100.98, against 116.92 in February, 1930. Total imports decreased from a maximum of 112.88 in 1928 to 103.70 in 1930 and to 90.24 in February, 1931, against 100.44 in February, 1930. Total exports have done better, for they have reacted from the maximum of 114.94 in 1929 to only 109.33 in 1930, and remain at 110.01 in February, 1931, against 110.54 in February, 1930. As to values, we sold in 1930 at 60.57 per cent, of the 1925 basis, and we bought at 63.14 per cent.; in February, 1931, we sold at 50.71 per cent, and we bought at 51.86 per cent. Thus we sold at prices comparatively lower than we were able to buy; but as we sold larger amounts, the slump in international prices made us the gainers at the end of the game.



Unemployment is, as usual at this season, diminishing; there were 670,352 unemployed at the end of April, against a maximum of 765,325 at the end of February. Last year the figures were 372,236 at the end of April, against a maximum of 466,231 at the end of January. How far the increase in emigration has contributed to the decrease of unemployment is difficult to say. Net emigration of working men had decreased continuously from 91.019 in 1925 to 55,438 in 1928 and to 46,731 in 1929. After the Government decided in June, 1930, to resume the liberal granting of passports to would-be emigrants, net emigration increased at once, and reached for the whole of 1930 the total of 176,519. In the first four months of 1931 net emigrants (that is to say emigrants minus immigrants) were 41,002 as against 15,185 in the corresponding period of 1930. Most of them go to France and Switzerland; in April last 5,949 went to France, 5,974 to Switzerland, 1,830 to the United States (including 1,231 going there a second time), and 1,196 to the Argentine. How they can manage to find work in a world full of unemployed is a mystery, and a proof of the great resourcefulness and adaptability of these very hard-working men. In due time the increase in emigration is bound to have a beneficial effect on the emigrants’ remittances. Perhaps, as after the 1887 crisis, the first signs of economic recovery will come from poor people.

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