2017 was the year of the Pir. the 2019according to the Government's intentions, it could be the year of the Cir. From Individual Savings Plans to Individual Savings Accounts. The difference? The first intend to convey the savings of Italians to small and medium-sized enterprises, the second want to move it to government bonds.
CIR: WHAT THEY ARE AND HOW THEY WORK
Encourage citizens to buy Italian bonds to bring some debt back into our home – today the share of Btp in Italian hands is around 5/6% – and relaunch the infrastructure sector. This is the purpose of the Cir, an instrument which, according to rumors, is being developed by the Mef and which could make its debut next year.
The object of the investment is therefore clear: "Government bonds and similar issued, for the purpose of consolidating, improving and developing infrastructures" with "purchase obligation upon issue and possession until maturity". Not only that, each issue should be linked to public works: schools, roads, etc.
The working mechanism would be the same as the Pirs, from which the Cir openly draw inspiration: foresee gods incentives for savers who decide to invest in Btp.
Let's take a short step back. The Individual Savings Plans work like this: investors who buy one and keep it for at least 5 will not have to pay taxes on capital gains and returns.
There are also rules for the composition of the portfolio: at least 70% of the total value of the PIRs must be invested in financial instruments issued or entered into by companies resident in Italy o in EU member states or in member states of the European Economic Area with permanent business in Italy. Of this 70 percent, at least 30% must be invested in financial instruments issued by companies other than those included in the FTSE MIB index, in order to reward small and medium-sized enterprises.
CIR: THE TAX BENEFITS PROVIDED
The key to take into consideration therefore are the taxes. Savers who decide to bet on Cir, an acronym for individual savings accounts, will be able to count on a defined package of tax breaks: whoever holds the bonds until their maturity will not pay Irpef on the yields, will have the possibility of deducting 23% of the invested amounts and any capital gains or losses will not count for Irpef purposes.
“We certainly don't want to ask for gold for the country. But helping those who invest in Italian securities has been our belief for years and it's in the government contract. It is possible to think of new issues of securities by making those who invest in their own country pay less taxes”, underlined the deputy prime minister, Matteo Salvini.
Each investor will be able to invest a maximum of 3 euros a year in Cir.
PIRs AND DOUBTS ABOUT CIRs
In 2017, the year of their debut, the Individual Savings Plans met with such unexpected success as to prompt many economists to almost cry out a "miracle". Speaking in numbers, last year the collection of PIRs amounted to 10,902 billion compared to the 1,8 billion expected on the eve by the Ministry of the Economy.
Precisely this success inspired the new Government which hopes to retrace the footsteps of the old Executive (the PIRs were launched by the Renzi Government), however by channeling the money of the Italians on the BTPs. Among other things, in the event that intentions were transformed into data, the Executive would also achieve two other consequential purposes: to shelter, at least in part, our Government bonds from the sales of foreign operators in the event of market turbulence and find new resources to finance public works.
The problem is that it could be the market that puts a spanner in the works of the Cir. The reason is suggested by the Pir. The 11 billion raised in 2017 were also possible thanks to ride in Piazza Affari and the stability of spreads and yields. So much so that in the first 6 months of In 2018, the PIRs collected “only” 3,38 billion and according to Equita, at the end of the year it will reach 6,5 billion, about 40% less than the previous year.
The turbulence of the Stock Exchange and theincrease in the "Italy risk", caused by the moves of the new government and by the open challenge that Luigi Di Maio and Matteo Salvini have decided to launch to Europe. It is no coincidence that if only Mid and Small Caps are taken into consideration (ie the companies in which the PIRs invest) we realize that they continue to trade at a premium.
Therefore, without economic and financial stability, the Cir risk becoming a big hole in the water, especially since government bonds are traditionally the first victims of speculation and the lack of confidence that the markets show in a country. The Government would do well to evaluate it.
(Last update: 10.26 on 10 October).
