In relaunch decree, several expansionary measures are based on the mechanism of tax credit. Among these measures, those relating to the construction sector (ecobonus, seismic bonus etc.) are the most interesting ones both for the entity of the resources involved, and for the innovative characteristics of the identified mechanisms and for the consequences they could produce. The decision to apply the aforementioned measures mainly to the construction sector recalls the role of powerful driver of local economic development which in our country is traditionally recognized in this sector. It is no coincidence that tax deductions for the recovery of real estate assets have been used almost continuously from 1998 to today. The measures introduced over the years have pursued multiple objectives which can be identified in the revival of construction, in the modernization of the real estate assets in terms of seismic resistance and energy efficiency and in the fight against tax evasion through the emergence of black. The facilitation mechanism has always consisted of a tax credit lower than the expenses incurred to be divided into ten annual installments of the same amount, within a different maximum limit in relation to the various planned interventions.
BONUSES IN BUILDING: 3 CONSIDERATIONS
The value of this type of intervention can be examined with respect to three main aspects:
- the driving force to boost the level of aggregate demand;
- the consequences on public finance balances;
- the impact on income distribution.
On the first point it is not easy to measure the economic effect overall, but it is nonetheless believed that the intervention in support of building activates a relatively high multiplier and has achieved significant volumes of investments estimated by CRESME at around 320 billion euros in the last twenty years.
On the front of public accounts recourse to the tax credit should have an immediate positive effect in terms of the emergence of a greater tax base, while it should involve costs, measured in terms of lower revenues, spread over several subsequent years. In reality, it is very complex to assess the effects on public accounts over time. The few available estimates are not unequivocal in determining the medium-long term consequences on public finance balances.
About the income distributionwe believe that these were partially regressive measures for three main reasons. First, the incentive mainly concerned those who owned a house; secondly, its application has never taken into account the contributory capacity of the beneficiaries and finally it has always required a fiscal capacity which by definition is possessed by the wealthiest, the only ones who have managed to make the most of the benefits of the various measures.
The few studies that have analyzed the impact of these measures have shown how the use of subsidized building renovation is strongly correlated with the level of well-being and with the socio-economic and cultural characteristics of the beneficiaries. It follows that the impact of tax breaks was different in the various geographical areas of the country. On the basis of the most recent data, relating to the sums deducted by taxpayers in their tax returns from 2011 to 2018, it is evident the gap between the North, where 66% of the deductions for building renovation and 75% of interventions aimed at energy redevelopment are concentrated, and the South and the Islands, where the subsidies for building restoration and energy redevelopment interventions amounted to 14 and 10% respectively (consider that 35% of Italian homes are located in the South).
THE SUPERBONUS OF THE RELAUNCH DECREE
In this context, the superbonus of the relaunch decree (starting with the ecobonus) present some important news which aim to address each of the three aspects mentioned above, creating, at the same time, serious dystonias and critical issues. The main characteristics of the provision have important effects on the three profiles identified above, probably penalizing the state accounts, but promoting both the propulsive capacity of aggregate demand in the short term, and a better distribution of benefits.
The two most interesting innovations are certainly the recovery quota of the 110% eco-bonus and the expansion of the possibility of transferring the tax credit to third parties, two aspects that have repercussions beyond the strict regulatory provisions.
- The eco-bonus rate
Let's start with the size of the deduction. Its value, which exceeds that of the expenses incurred, transforms the conflict of interest between suppliers and clients that existed in the previous settings into a sort of community of interests, since both parties are advantageous in seeing the expense increase up to the maximum deductible amount. The size of the deductions had always remained below 100% of the expenditure, leaving a part of the cost for the beneficiary of the relief. In this way the price increase by the suppliers was curbed and the interests of the State were aligned with those of the beneficiaries of the measure. Losing this basic role of market incentives the over-invoicing of jobs is in fact strongly encouraged and the effective allocation of public resources to the noble objectives of the law therefore depends solely on the effectiveness of the anti-avoidance safeguards, centered on compliance visas, which in this case may be deemed ineffective and difficult to verify by the State.
In this context the effectiveness of the measure in question could be increased through a remodulation of the rates below 100% which leaves a share to be paid by the client, thus avoiding the commonality of interests in increasing the amounts of expenditure. In turn, and with the same allocation, this would create fiscal space to be used for expanding the field of action of the law in three directions: including more subjects as beneficiaries, extending it to other types of intervention linked to the building world, and lengthening the window within which the work must be completed.
- The transfer of the tax credit with the eco bonus
As far as the faculty of transferring the tax credit is concerned, it should be remembered that the citizen who uses the facilitation can monetize it in three different ways:
- by deducting it from his taxes due in the five years;
- obtaining a discount on the invoice from the supplier, who in turn will be able to transfer the tax credit of his client to third parties;
- transfer the tax credit directly to third parties.
In other words, the relaunch decree, providing for these possibilities, provides the conditions for the creation of a market for tax credits with great potential. The negotiation of these tax credits, if on the side of the client of the works it provides the possibility of immediately monetizing the relief, on the side of the buyer it allows to pay less taxes by purchasing the tax credit at a price lower than its nominal value and using the horizontal compensation between tributes. In practice, the premises are being created for an instrument that could resemble a quasi-currency or a fiscal currency.
The new tool will allow the client to carry out the works free of charge and without even the need to advance liquidity. Similarly, the same instrument will satisfy the demand for tax credits of those (individuals, companies and banks) who will see in the regulation the possibility of developing a new service and/or of achieving savings on the taxes actually paid. So it will be essential the involvement of financial intermediaries, whose role will be expanded by the relaunch decree.
Currently, the transfer of credit to banks and finance companies is envisaged only for taxpayers falling within the no-tax area and therefore confined to a small number of subjects (Provision 165110 of 28/8/2017 of the Director of the Revenue Agency). In turn, the involvement of banks and financial institutions will depend on how streamlined and secure the transfer of credit will be. You will have to reduce bureaucratic complexities and clarify procedures and responsibilities in order to reduce the risks and the consequent sanctioning actions by the supervisory authorities.
In fact, banks may be hesitant to assume credits that could potentially be subject to recovery by the Revenue Agency because they derive from undue and not due subsidies. Overcoming this obstacle requires that the law can ensure the definitive existence of the credit once assigned and/or introduce a sort of with-recourse method.
A second problem could arise from the capacity of the banks themselves to absorb tax credits. To remedy this eventuality, the introduction of a sort of "fiscal currency" market could be opened. In practice, the possibility could be envisaged of representing tax credits with certificates whose transferability and acceptability should be increased, for example, because they are used by the State to settle arrears towards companies and because they are accepted by the State to pay taxes.
Last but not least, to enhance the potential of the embryonic innovations contained in the relaunch decree, the possibility of develop the tax credit market within the rules and controls of the Revenue Agency, facilitating the exchange of certified credits between holders of tax credits, accrued as a result of the work carried out, and those operators (companies, banks or other private entities) who want to reduce the effective level of their taxation.
In conclusion, if on the one hand the conveniences and criticalities of the "Relaunch" decree are clear, on the other hand the potential that the decree deploys towards the creation of a regulated market of all tax credits managed by the Agency is also traceable of the Revenue.
