Italy deficit balloons on green homes scheme
by AFP Staff Writers
Milan (AFP) March 1, 2023

Italy's deficit on Wednesday was revised up significantly for the past three years to take into account government tax credit schemes, including one to make homes more energy efficient.

The deficit was 8.0 percent of gross domestic product (GDP) in 2022 -- compared to the government's goal of 5.6 percent -- and was revised upwards from 7.2 percent to 9.0 percent in 2021, according to the Istat national statistics office.

For 2020, it was revised up from 9.5 percent to 9.7 percent.

Growth meanwhile was at 3.7 percent in 2022, in line with government forecasts.

The revised figures follow a directive issued last month by Eurostat, the European Union's statistics office, requiring tax credits to be accounted in state budgets when they are issued, and no longer when they have a real impact on tax revenues.

This includes credits issued under the so-called superbonus scheme, introduced by a previous Italian government in 2020, which new Prime Minister Giorgia Meloni last month declared were "out of control".

Under the wildly popular scheme, the state paid 110 percent of the cost of making homes greener, with the subsidy delivered via a tax credit or tax reduction.

The tax credits were tradeable and became a sort of parallel currency.

As intended, the superbonus boosted the construction sector and the wider Italian economy in the wake of the coronavirus lockdown -- but has so far cost the state 61.2 billion euros ($64.8 billion), according to the finance ministry.

With other construction bonuses taken into account, the amount reaches 110 billion euros, or about six percent of GDP.

It had been budgeted at a total cost of 72.3 billion euros -- creating a hole of 37.7 billion euros.

Meloni's government reduced the superbonus subsidy from 110 percent to 90 percent last year, and last month put a sudden stop to the use of the tax credits, which can no longer be negotiated or cashed.

Previously the credits could be used to pay builders, who then sold them to a bank, which could claim the money back from the state.

For 2023, the effects of the tax credits on the deficit -- forecast at 4.5 percent of GDP -- should be "limited" due to the new restrictions imposed, a government source told AFP.

The deficit should also benefit from better-than-expected economic growth this year, the source said.

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