Italy’s deficit-to-GDP ratio came in at 8 percent for 2022, significantly higher than the 5.6 percent the government had previously predicted, with state-funded subsidies for home renovations cited as a major factor.
The revised figures issued on March 1st came as a result of a directive issued last month by Eurostat, the European Union’s statistics office, requiring tax credits to be accounted for in state budgets when they are issued, and no longer once they have a real impact on tax revenues.
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The increase was dubbed the “superbonus effect” by Italian media as the figure now includes credits issued under the so-called superbonus scheme, introduced by a previous government in 2020, which Prime Minister Giorgia Meloni last month said were “out of control”.
On February 17th the Italian government abruptly changed the rules and stopped issuing tax credits to fund the bonuses in a sudden move which news reports later attributed to Eurostat’s announcement of the accounting change.
This change all but ended claims for the state-funded ‘superbonus’ as well as other bonuses which relied on the use of tax credits.
Under the wildly popular scheme, the state reimbursed up to 110 percent of the cost of some types of home renovations, with the subsidy delivered via tax credits or as a future tax deduction.
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A building site in Rome’s Corviale-Portuense district on February 21st. – Italy’s building superbonus has led to fraud and spiralling costs, the government said after it curbed the scheme on February 17th. (Photo by Andreas SOLARO / AFP)
The superbonus was introduced to boost the construction sector and the wider Italian economy amid the pandemic-induced crisis – but its overwhelming popularity has caused a builder shortage as well as a much higher than anticipated cost to the state.
Italy’s construction bonuses have cost €110 billion, equal to about six percent of GDP.
The government had budgeted for a total cost of €72.3 billion – creating a hole of €37.7 billion.
Meloni’s government had already cut the maximum superbonus subsidy from 110 percent to 90 percent last year.
The new restrictions mean the bonuses should have a “limited” impact on the deficit in 2023, AFP reported, citing an unnamed government source.
The deficit should also benefit from better-than-expected economic growth this year, the source said.
READ ALSO: Italy’s building firms warn of bankruptcy risk after superbonus changes
The government has said it is working to find a solution to financial problems for the construction sector caused by the sudden withdrawal of tax credits.
A lack of liquidity means tens of thousands of construction businesses are now in danger of going bankruptindustry representatives said, and many building projects risk grinding to a halt.
Builders’ association ANCE said in a statement on Tuesday there was “strong concern about the explosive situation that has arisen” after the rule change.
It said there was now a funding gap of “some 19 billion euros” which is endangering “some 115,000 home renovation sites throughout Italy, more than 32,000 companies and 170,000 workers, which would double if we consider associated industries.”