Roberto Gualtieri’s interview with Il Sole 24 Ore
«In a coalition – explains Gualtieri to Il Sole 24 Ore – a certain level of discussion is physiological and in the end all the points of the government program have become chapters of a manoeuver that besides dealing with the issues inherited from the past, gives start with an unexpected ambition to pro-growth measures»
12' di lettura
The night between Tuesday and Wednesday has been a long night and works within the cabinet on budget law, fiscal decree and Draft Budgetary Plan have ended just a little time before dawn. However «everything went really well», says the Minister of Economy and Finance Roberto Gualtieri speaking just a few hours later with Il Sole 24 Ore, «because all decisions were taken unanimously, on time and we were able to find a final point of balance that makes the overall package clearly expansionary”.
The last few hours have been spent on solving the technical issue of the 3 “additional” billions on budget balances for 2020 which in the end has been solved through a remodulation which lowers the 2019 advance deposit and raises for next year the remaining balance on Vat number holders subject to Isa (synthetic indicator of reliability). Then there were the more political questions relating to the fight against tax evasion. «In a coalition – explains Gualtieri – a certain level of discussion is physiological and in the end all the points of the government program have become chapters of a manoeuver that besides dealing with the issues inherited from the past, gives start with an unexpected ambition to pro-growth measures. And all of that without the long list of new taxes that some feared at the beginning».
The relationship with Prime Minister Conte is «optimal», adds Gualtieri, and there is “full agreement” on the effort that needs to be put in place to fight tax evasion and to provide incentives for traceable payments. There have been rumors also of an sms received by the Prime Minister urging you not to yield on this front. «More than an sms – clarifies Gualtieri – it's about a shared priority which needs to find resources. And in the budget law these resources have been found».
Notwithstanding these shared objectives, didn't the yellow-red coalition go too far on personal attacks in its first field test? In your previous European experience you had the chance to fine-tune the art of mediation Was it helpful in the last few days?
My method consists in looking always for shared solutions amongst different points of view, as it is physiological in Europe and indispensable in a government coalition.
However, unlike your predecessor, you are a political Minister.
And that is why it is important that the mediation work is done actively, keeping well in mind the direction in which the government is moving, as we have done coming to a unanimous solution. We compared our ideas not only within the government coalition but also in our dialogues with our counterparts at social, economic and corporate level and, in spite of the limited amount of time we had, we managed to define a common path that now will be carried on in the Parliament.
With what results? How much the limited availability of resources has weighed on?
We must not forget that this is a complex budget law, which must stop VAT increases but cannot be limited to doing this alone. The overall package not only manages to deal with a heavy legacy, but for the first time after several years increases the resources allocated for public investments, puts the incentives back in place for private investments and gives start to measures for fostering social and environmental sustainability. That is because intervening on the fees of nursery schools, as we are doing, does not only mean helping families with medium-low incomes, but also increasing the rate of female participation in the workforce. It is no coincidence that this rate is so low in a country that offers a kindergarten to only 10% of its children. But of course all this only marks the start of the government action.
In the sense that we now want to start a series of working groups on crucial issues, we want to carry out an ambitious tax reform, open a discussion on pensions to manage the “after Quota 100”, create a new commission on the spending review, and give a strong impulse to unlocking the investments that are already in the budget. This is a series of structural themes to be developed with the method of involving the various political and social actors. The goal is to put the country back on the road to growth, with less debt, less tax evasion and lower taxes on work and business. But to get started, it was necessary first of all to bring Italy back on the right track as a protagonist in Europe.
What does it mean «managing after quota 100»?
We need to build a more equitable, flexible and balanced structure of the social security system, and also in this case we have agreed that taking the time for a comprehensive reform was more effective than an impromptu intervention on the retirement windows. Also because the low adhesion of potential interested parties to early retirement continues to project a much lower expenditure than expected, and therefore it seemed more appropriate to follow this trend, use it for the definition of the balances and in the meantime start a dialogue with the social parts. Because with them we share the fact that there is a need for urgency in addressing the structural issues.
For instance the lengthening of more than 5 years that could occur at the end of 2021 with the ending of quota 100?
That but not only that. We want to tackle the overall issues of equity, starting with heavy jobs, women and young people, and of the efficient use of resources.
But rejecting the idea of an immediate correction of quota 100 didn't diminish the character of discontinuity with respect to the economic policies followed so far?
In reality we have put in place a significant but reasonable discontinuity, which is deployed on several levels. There is first of all a discontinuity in terms of method, because we are demonstrating that it is possible to have flexibility without creating unnecessary tensions on financial markets and with Brussels, while the strategy of confrontation has had a very heavy impact on public finance, and in the end it has paradoxically reduced even the very same possibility to request additional fiscal spaces in Brussels. Then, there is the discontinuity of merit. For example in saying “no to any amnesties” and in putting resources on investments and on tax wedge rather than on the Flat Tax.
About the Flat Tax, what happens to the one introduced last year for self-employed workers?
On the so-called Flat Tax on Vat number holders we have canceled the unjust hypothesis of raising to 100.000 euros with a rate of 20%, while on the one already in force up to 65.000 euros we have limited ourselves to correcting the most questionable aspects. Instead we will not include the dedicated account obligation to avoid further costs at this stage. On citizenship income there is a shared view on the fact that we need to improve its connection with active labor policies, and we will do so.
And on the safeguard clauses?
The budget law cancels the VAT increases of 2020 and significantly reduces those expected in 2021 and 2022. But above all it does not put new clauses on subsequent years. Because it is a negative tool that must be overcome. Getting out of it takes time, but overcoming the clauses means changing the budget policy approach, being able to plan the measures already in April with the Def (the document which contains the blueprint for the budget law) and inserting them in a multi-year horizon. Because an economic policy cannot be done with a single budget law.
Especially when resources are scarce. There are those who have accused the government of a certain shyness in the pro-growth measures, as the budget law is 75% dedicated to defusing the VAT increases. Why didn't you choose a different path, with a partial revision of the VAT to have more fiscal space for other interventions?
It is a known fact that we have discussed different hypotheses. And finding a new balance among the various taxes, including through a remodulation of VAT rates, is an option that has many strengths. But we also know that it can be risky to rush into tax reforms. The government was born in early September, we explored possible remodulations linked to incentives for traceable payments, but we concluded that it is better to put in place a more organic tax reform, also to avoid hasty interventions that then risk having to be corrected thus creating uncertainty. The theme therefore remains on the table, as one of many policy actions that will be addressed within the framework of an overall tax reform
With the risk of tax increases?
The objective is to continue with the reduction of the fiscal pressure that we are already starting this year and that we want to achieve, unlike the League, sticking to the principle of progressive taxes. We will carry it on relying on three main engines. The relaunch of growth, the reduction of the cost of interests which is the most inefficient chapter of public spending, and the fight on tax evasion that has reached unsustainable figures for a modern country. On the interests front we have already achieved important results, yesterday the spread closed at 131 points, from the 135 of the previous day and in the past few hours it has fallen below 130 as it hadn't happened since May 2018. But we aim to do much more. And on tax evasion we are putting in place an important package that with the digital payments plan aims to promote the modernization of the country.
However, the receipts for 7 billion euros penciled in as a result of these measures have immediately disappeared.
Let's be clear. In the Nadef (the update on the document with contains the blueprint for the budget law) there was no reference to the 7 billion stemming from the fight against tax evasion, because that 0.4% of the GDP was immediately also linked to other tax revenue measures. They have accused us of setting unattainable goals, while in reality we have been more than prudent. Technically, anti-evasion measures are worth three billion in revenue, and in the Dpb we sent to Brussels we included a detailed analysis of each of our interventions. The revenue estimates have been analyzed one by one with the tax agencies, and in all cases we have chosen to put black on white the most prudent estimate of the fork.
So don't you fear objections from Brussels?
Europe asked us for the details, and we provided them with the utmost precision. Of course, the Commission will evaluate the budget law as it always does, but this time I expect an ordinary dialogue, as it is usually the case with all countries.
Even on the three billion euros in revenue moved to next year?
Here too we need to be clear, because it is not a question of moving revenues. At the time of the Nadef we did not have some data for the simple reason that the payments of the taxpayers subject to Isa shad been moved to September 30th. This is why we have made over-prudent estimates, which have been surpassed by the arrival of actual collections data. So now we will reduce by 10% the advance deposits that are to be paid in 2019, remodeling the balance for next year. This measure concerns revenues for 1.5 billion, while the other 1.5 billion comes from structural reasons and depends precisely on the compliance effects that have also increased this year's receipts.
But even this is not sufficient, given the growing controversy on the “list of new taxes” coming up with the budget law.
I understand very well the role of the opposition. But it must be said that in reality the interventions of this type are decidedly limited both in number and in amount, and almost always the tax increase is accompanied by forms of incentives in a logic of transition towards sustainability. On meal tickets, for example, the reductions for paper ones are reduced, but are increased for electronic ones. There are two new measures on the use of plastic, but limited to packaging, and on the so-called Sugar Tax, which will be limited to drinks and will not affect snacks, to be clear. There are no interventions on fuels, and there will be no retroactive intervention on tax deductions as is has been said.
There has been controversy also on the flat rate tax for rent controlled apartments, increased from 10% to 12.5%.
Also this measure should be considered more carefully. In reality, the 10% tax rate was temporary and was destined to rise to 15%. Instead, with our intervention we fix it permanently at 12.5%. If you look closely, then, it is a reduction in taxes rather than an increase.
But even if not retroactively, do you still plan on intervening on the various tax deductions?
There will be a reduction of the subsidies on some expenses, but to a very gradual extent and limited to very high incomes. Overall, the chapter dedicated to the remodulation of tax expenditures and environmental taxes is worth 943 million euros in the Dpb, so it has been further lightened compared to the forecasts contained in the Nadef. It is obvious that a budget law needs financial coverage, and that work has not been easy, but objectively this fiscal component is modest and lower than what many had feared.
In the fight against tax evasion, a key role is entrusted to the tightening of the compensations scheme. But in this way, isn't there a risk to hit honest taxpayers, who face a lengthening of time before they can use a compensation they are entitled to, with negative effects on their liquidity?
Precisely to avoid this effect we decided to set aside the most invasive hypothesis, which intervened directly on the 730s (the income tax declarations). The other measure, which is worth 1 billion and calls for a tax credit to be used only after it has been indicated it the tax declaration, objectively faces a real problem, that of an unsustainable level of abuse that clearly emerges from the data. There may be some initial difficulties, but this measure will eventually be metabolized by the system, as it has happened to other interventions in the past.
On penalties and punishability thresholds of tax crimes did the tension run high? Has an agreement been found?
This issue is the responsibility of Justice Minister Alfonso Bonafede. The tightening of sanctions for the great tax evaders is an objective of the government program, and I agree with it. Naturally it must be achieved with balance both in the method and in the merit, because all interventions on the Penal Code are clearly delicate, and on this approach there is consensus in the government. In the decree there is a first rule on the increase of sanctions for fraudulent declarations, and we have the time to deepen the other aspects.
Alongside the sanctions there are incentives, and there is been much discussion about this as well. What solutions have you found?
The incentives are the heart of the philosophy we are putting into practice, and we have shared with the Prime Minister Conte our choice to invest with decision on a great plan for digital payments. The plan will consist of an organic series of measures, including a strengthening of the receipts lottery with a significant increase in prizes from January 1st. From the middle of the year on, we expect to introduce the superbonus, that is the reimbursement of a part of the expenses made with traceable payments in those sectors where today the use of cash is more widespread. The mechanism is designed to progressively reward the increase and diffusion of digital payment instruments. Then we want to introduce incentives to foster merchants' acquisition of the Pos and we will reason with credit card companies on the reduction of commissions.
This set of measures is linked to the need to cover the interventions of the budget law, which in addition to VAT focus on cutting the tax wedge. Here, too, a heated discussion arose between those who pushed for a concentrated focus on workers and those who asked to look at companies. How will it end?
The three billion available for this year, and the six at full capacity, will be concentrated on workers, as indeed we have been asked by both trade unions and Confindustria. In the last few days we have managed to find the resources to respond positively to the call to increase the weight of this cut and give more macroeconomic substance to the measure. On how to implement it, we are working in agreement with the Ministry of Labor, and we are having interlocutions with the social partners, in order to best evaluate the possible audience of beneficiaries and the methods of application.
The budget law promises new allocations for public investments, but the problem of the use of funds remains as does the problem of the fiscal room restricted by public debt but also by Ue rules. How do we get out of this situation?
First of all, it is important the choice we made to return to increasing resources because to revive growth we must re-launch investments. In their management, we will work closely with the dedicated coordination structure that was set up at Palazzo Chigi. But we need to broaden the perspective. Because in addition to increasing public investments, it is crucial to strengthen their connection to private investments as well. And all the tools are now in place.
The budget law refinances the incentives of Impresa 4.0, returns to extending them to training and extends the impact to the interventions for green production conversion in order to incentivize the development of the circular economy. Then there is the refinancing of the Nuova Sabatini, the Sme guarantee fund, the advance to 2022 of the total deductibility of the IMU tax on the real estate assets that are instrumental to the business of companies, and we reintroduce the Ace to promote the dimensional growth of the companies. We need to enhance tools that had already appeared in the Juncker Plan and then in the InvestEu program, within the strategy for a great European Green Deal plan that aims to mobilize a total of one thousand billion euros. Italy is an active promoter of this plan, and in his capacity as Commissioner for Economic Affairs Paolo Gentiloni will also have this competence.
However, the fact remains that the golden rule has been discussed for years without much construct.
On the golden rule, in any case, the debate has now been reopened, and on the possible preferential treatment of investments directed to environmental and social sustainability, which I proposed to the Euro group in Helsinki, I recorded some first significant openings. Italy will be the protagonist in this debate.
(Translation in english by Corrado Poggi)