What effect will the savings tax reform, which is once again on the government's agenda, have on savings? To discuss it, it is necessary to put aside the cause-effect determinisms that are ill-suited to the complexity and interdependence of financial markets and to the cognitive distortions that characterize the behavior of the subjects who operate in them, including savers. Here are 11 reflections on the draft delegation for the tax and welfare reform developed by the Ministry of the Economy (which at best will involve changes starting from 2012) and on the stabilization maneuver definitively approved by the Chamber on 15 July (it is the one that concerns the increase in stamp duty on securities deposits).
1) If it is confirmed that the 12,5% rate will remain only for government bonds and postal bonds, it is difficult to imagine that a higher rate could be applied to all equivalent bonds such as government bonds of other countries of the European Union and the bonds of supranational entities. This in order not to introduce discrimination which is difficult to reconcile with Community principles. Therefore the possible detrimental effect on savings will not concern a far from negligible slice of the tools typically used by savers.
2) Most of the volumes traded on Italian government bonds is due to negotiations by institutional lords, therefore completely indifferent to changes in withholding taxes applied to private individuals. This applies not only to MTS, the wholesale market by definition, but to a large extent also to the main retail market, the MOT. The average value per contract of Italian government bonds traded on the MOT between January and May 2011 was 62.592 euros, an amount beyond the reach of most savers and which therefore could signal a substantial presence of institutional operators. Ultimately: the prices of BOTs, CCTs and BTPs are determined by the exchanges of banks, mutual funds, hedge funds and pension funds (all lordists!), not by Mr. Rossi's negotiations.
3) It is more possible (although not certain) that the passage of the withholding tax from 12,5% to 20% will have effects on the prices of bank bonds and corporate bonds in general that will suffer it. The precise weight that savers have in the trading of these bonds is not known, but it is certainly higher than that of government bond trading, given that the average value per contract of bank bonds traded on the MOT is 15.878 euros. How might any adjustment work? Let's take two securities that are similar in terms of coupon, solvency and duration, and listing market (MOT): one destined (apparently) to remain taxed at 12,5% and the other destined (apparently) to pass to the withholding tax of 20%. The first is the BTP maturing 1 February 2018, which at the prices of Friday 1 July discounts an effective gross yield of 4,36% gross and 3,79% net. The second is Enel expiring June 12, 2018, which offers an effective yield of 4,05% gross and 3,47% net. Given that, as mentioned, for the BTP the price and the net yield are indifferent to the tax treatment for savers because they depend on the decisions of the lordists, it is clear that to maintain that 3,47% net in the presence of an increase in the withholding tax, the price of Enel bonds will have to go down. But are we sure that this will have to happen? No, because the trend in the price of the Enel bond will also be determined by many other factors, such as, for example, the perception of a greater or lesser relative solvency of the electricity group compared to that of the Italian state. Without forgetting that even among the subjects who negotiate Enel bonds there are institutional lordists who, in the event of downward pressure on the price of the bond in question due to the search for a higher gross yield by net savers, could enter into purchases and realign almost instantly the listing to the previous situation.
Whether or not the price remains unchanged, other conditions being equal, what is certain (taking into account the clarification in the next point) is that the future net coupon flows of those who are already bondholders of a security subject to the withholding increase will be lower . It remains to be discussed whether this reduction is discounted immediately with a drop in the price of the security or diluted on the coupons accrued and collected from the entry into force of the reform to maturity.
4) All these arguments can make sense if the reform will have immediate effect on securities currently held by Italian savers, obviously only for future income. If it were to come into force only on new issues (an unlikely hypothesis because it would somewhat postpone obtaining the incremental revenue to which the Government is aiming), another scenario would open up which I am omitting here.
5) If it is difficult to predict the impact of the new taxation on the prices of fixed rate bonds, instruments on which it is possible to make some projections, let alone when there are shares, derivatives (warrants, futures, options and so on) or bonds variable rate, or in currency, or structured. With these instruments there will be a greater future tax burden for their owners, but their future returns (even net of the new taxes) are a function of a multiplicity of variables on which it is difficult to speculate. If then the reform - as it seems - will also concern other income as well as capital income, it suffices to remember that when the capital gains tax came into effect at 12,5%, on 1 July 1998, the index of Piazza Business rose before (+58,7% in 1997), during (+43% in 1998) and after (+30,6% from the beginning of 1999 until the bursting of the New Economy bubble in March 2000) that event. Which therefore, in a euphoric market, went unnoticed.
6) Still if the differentiation for government bonds is confirmed, the reform should regulate the taxation "for transparency" of mutual funds (which pass to 20%) as regards the portion of the portfolio invested in government bonds. Otherwise it would not be understood why by buying these instruments directly you pay 12,5% and instead through a mutual fund 20% (now in cash, based on the legislation that came into force on 1 July 2011). The effects of the super stamp introduced by the stabilization maneuver on funds and Sicavs are also controversial. As Gianfranco Ursino reported on Plus24 on Saturday 16 July on page 6, many banks oblige holders of fund and Sicav units only to obtain a dossier when it would not be necessary. And then: do the units of funds and Sicavs present in a dossier together with other securities such as bonds, ETFs and shares raise the taxable base for the purpose of exceeding the super-tax thresholds (50.000, 150.000, 500.000 euros)? Clarifications are urgently needed from the Ministry of the Economy. The only certainty is that among the products sold in the bank, in addition to deposits, only Life policies are currently exempt from the super stamp (see also points 9 and 10 below).
7) If, as it seems, pension funds remain taxed at 11%, they will strengthen their tax privilege over financial instruments. The issue of tax incentives for long-term savings plans other than pension funds remains to be discovered, on which a hint has appeared among the meager information available. But for this purpose, as Luigi Zingales wrote in the Sole-24 Ore of 3 July, mutual funds truly dedicated to the long term, characterized by low turnover, need to be created.
8) Chapter of bank deposits: even here it is not said that the reduction of taxation on interest from 27 to 20% should translate into a higher future net return for their holders. Because it is by no means certain that gross rates will stay the same! In fact, these depend on the general trends in short-term rates and on the commercial policies of the various banks. What is very probable is that the online banks that in recent years have focused on repurchase agreements as a contractual formula for liquidity management to take advantage of the 12,5 rate instead of 27% of deposit accounts will have to review their choices (yes see the interview with the managing director of Fineco Bank Alessandro Foti, in the Corriere Economia of 11 July on page 17). Also because repurchase agreements for amounts exceeding 50 euros can require a securities dossier which is now subject to super stamp duty, deposit accounts cannot (see also point 9 below). As analyzed by Gianfranco Ursino on Plus24 of 16 July on p. 5, there does not seem to be an obligation to adopt an administered dossier if it is intended to manage only repurchase agreements, contracts whose securities which are the object of it represent a guarantee and do not pass into the customer's availability (so much so that it is impossible to sell them).
9) We arrive at the stabilization maneuver approved by the Chamber on July 15th. The amendments presented to the Senate on July 13 strongly mitigate the effects on savings that I had initially analysed. There will be no convenience in transferring small savings from securities dossiers to bank deposits (net of what the convergence to 20% of tax rates on financial income will entail), because the stamp duty is destined to remain equal to 34,2, 50 euros for administered deposits with balances of less than XNUMX thousand euros. Indeed, as we will see, dossiers with a nominal value of less than 10.000 euros risk paying nothing at all. For securities deposits with balances between 50 and 149.999 euros, the stamp duty immediately goes to 70 euros (230 euros from the beginning of 2013). For securities deposits with balances between 150 and 499.999 euros, the stamp duty immediately goes to 240 euros (780 euros from the beginning of 2013). For securities deposits of €500 or more, the stamp duty immediately rises to €780 (€1.100 since the beginning of 2013). In essence, there will be (contrary to what the text of Decree Law 98 published in the Official Journal on 6 July entailed) the convenience of leaving marginal securities deposits active rather than closing and concentrating them. This fragmentation of securities dossiers (up to 50 thousand euros, because from that threshold upwards the maneuver would push towards unification) gives rise to the need for a single, organic and efficient reporting of the family's financial wealth, which can be achieved, for example, with the Toolbox contained in the training offer of YouInvest. A still controversial issue is that of the definition of the tax base on which to apply the tax. As reported by Vitaliano D'Angerio and Gianfranco Ursino on Plus24 of 16 July on p. 4, the text of the maneuver indicates the "nominal or redemption value" of the instruments contained in a dossier. So not the market value (difficult to determine for a large number of illiquid instruments). Given that it is not difficult to establish the nominal or repayment value of the bonds, how is the taxable amount measured in the case of ETFs or shares (given that for the latter on the basis of art. 2346 of the Code Civil may not be expected a nominal value)?. Clarifications on this and other points are awaited from the Ministry of the Economy. The "no tax area" for administered dossiers is not up to 1.000 euros (exemption limit based on Presidential Decree 642/1972) but, as noted by Fabrizio Vedana of Unione Fiduciaria, up to 10.000 euros. This on the basis of the combined provisions of the stabilization manoeuvre, of art. 119 of the TUB, and related Bank of Italy Instructions. The maneuver in art. 23 in fact specifies that the prerequisite for the application of the stamp duty is the sending of periodic communications to customers. The Bankitalia Instructions specify that banks and customers can agree that the communication is omitted when the nominal value of the securities does not exceed 10.000 euros. More controversial is a question raised by Luigi Guiso on p. 22 of Sole-24 Ore on Thursday 14 July. Basically Guiso argues that a file administered with only one security in stock should not be considered as such, and therefore following the maneuver an incentive could arise to invest in a single financial asset, thus saving stamp duty (or super stamp depending on the amounts) . Apart from the fact that D'Angerio and Ursino on Plus24 on July 16th raised doubts (like me) on whether the Ministry of the Economy could lean towards this "loose" interpretation; but above all, even taking into account the tendency of many savers to self-harm, I doubt that on the basis of the Mifid rules, a bank or a SIM will take responsibility before Consob for allowing an investor to concentrate 100 thousand or more euros in a single bond or one action. According to Professor Guiso, the super stamp would also create distorted incentives to concentrate the securities owned by a single bank, thus leading savers to put their eggs in the same basket. Anyone who has 500 euros in one bank and another 500 in another would save 1.100 euros by merging their files. Ideally, in the presence of assets of a certain size, I too would prefer to have a plurality of banks to refer to, while bearing in mind that administered savings is always a separate asset from that of a bank and in the remote case of insolvency of this last it is returned to the customers. Among other things, a plurality of securities deposits can also respond to the non-negligible need not to disclose to any bank (and its employees) the complete map of one's wealth. Then pay attention to exceeding the brackets for the application of the stamp duty (remembering that clarifications are needed on the determination of the taxable income): for those who have just over 500.000 euros of securities in the dossier a few days before the date of application of the tax, it will be close a small position and save with certainty 320 euros in taxes (equal to the difference between 1.100 and 780 euros in tax for the two brackets starting from 2013).
We must then ask ourselves what will be the consequences of a possible unified rate of 20% on bank bonds, in recent years a privileged and contested (also by Consob) source of financing of credit institutions towards savers. If and when the reform comes into force with this measure, bank bonds will no longer have any tax advantage over deposits, and will continue to expose intermediaries to bureaucratic and organizational burdens (prospectuses and compliance). Banks could therefore find it convenient to push the accelerator on the simplest and most guaranteed bank deposits (or on the old certificates of deposit). But I wouldn't want any bank to invent structured deposits! A final reflection on securities deposits: for several decades the economic policy of various governments has tried to promote popular shareholding, as happened on the occasion of privatizations. But even cooperative banks have by definition a myriad of small shareholders. The stamp duty increase represses the existing forms of public share ownership. Is this one of the effects desired by the Government?
10) Some banks already cover the stamp duty on the securities dossier at their own expense. This is the case of some online banks that offer repurchase agreements at rates that are competitive with those of deposit accounts. We need to see how these banks will move in the light of the immediate increase in stamp duty for dossiers with deposits exceeding 50 thousand euros: whether they will opt to offer deposit accounts instead of repurchase agreements (as seen in point 8), or if they will keep the burden on their income statements, or if they will offload it entirely on the customer, who could thus see a higher onerousness of repurchase agreements compared to that of deposit accounts (which will continue to be subject to stamp duty of 34,2 euros also for amounts exceeding 50 thousand euros). It is also necessary to understand what will happen to the sub-registered accounts, with which several people (typically from the same family, but not only) hold various securities dossiers that "clustered" refer to a main account and a single account statement. The increase in stamp duty will raise the attention of the tax authorities on these dossiers, which can lend themselves to evasive practices. Finally, I would like to humbly remind you that an investor wishing to avoid paying stamp duty could transfer his managed savings completely legally to a bank or intermediary resident abroad. Thinking about it could above all be investors with securities portfolios exceeding 500 thousand euros, who from 2013 will find themselves paying stamp duty of 1.100 euros a year. If they took this decision, however, they would have to fill in the RW framework of the Unico model every year, calculate and pay the taxes on the financial income themselves, or go through a trustee. Is it worth it? The answer is up to you.
11) For years I have heard various entrepreneurs ask themselves: “Why should I invest my savings in my company? To see them taxed on returns at 27% of IRES plus IRAP when instead if I invested them in financial assets I would be taxed at 12,5% without making any effort?”. The reform under discussion could make this alternative less efficient. But only for financial instruments other than government bonds and equivalent. The not entirely illegitimate alibi of entrepreneurs unwilling to invest in their own company can therefore resist. This is in my view one of the main weaknesses of the announced reform.
*Marco Liera is the site director YouInvest – The School For Investingfrom which this article is based.
