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NEWSLETTER

The year that is about to end has certainly not been one of the most brilliant, despite the numerous announcements of recovery, albeit weak, under way in various parts of the Old Continent. The truth is that in the face of:

• a strong recovery of the US economy – in actual fact a war economy, although the war is no longer “cold”, but rather very “hot” and fought on various fronts – led by a re-elected president who holds “pre-emptive war” to be a main pillar of his doctrine, and
• the uninterrupted growth of the Chinese economy, as of all of South-East Asia, and lately also of Japan.

Europe is in the depths of economic stagnation, thanks mainly to an overly strong euro, but also to its age-old woes: demographic decline and a general ageing of the population, together with an impetuous rise in production and labour costs (whether or not reflected by the statistics).

The one bright note is the ongoing economic growth in the ten new member countries of the European Union which, with their relatively young populations, their currencies not yet strongly tied to the euro and the possibility of a certain amount of labour market flexibility, will enjoy strong growth for another decade or so, inevitably producing a positive fallout on the entire continent.

What about the “historical” members, first and foremost Germany, France and Italy? They can do nothing but stand by helplessly and endure a recession which, although not deep, is certainly evident. And tax-wise the results are there to see.

In these countries it has become imperative to crack down on capital gains tax evasion – given the constant decline of corporate profits – a fight waged with tax shields, big and small, and tax amnesties. Save perhaps in the case of Italy, where the hoped-for results were almost reached, even if only a drop in the ocean of capital stashed abroad, the battle has been a total failure, the German and Belgian cases being emblematic.

The rich and elderly members of the population are very wary and well apprised of the fact that if they repatriate their assets there is no younger generation of entrepreneurs ready to fruitfully exploit investment capital on the continent, but rather in the East or in China, for which reason there is no need for them to bring their money back into the country.

The deeply felt patriotism that can still be found in America, which regularly sends its sons and daughters day after day to die on the other side of the world in order to strengthen the country’s economy, as well as its domestic security, seems to have faded over time in the Old Continent, perhaps in consequence of too many wars and too much bloodshed.

So what is left to be taxed? The three Ps:
- Property (real estate),
- Provisions and
- the Poor

Real estate properties, precisely because they are immovable and easy to check on with a simple satellite in geostationary orbit; provisions, i.e. consumer goods, by increasing direct and indirect taxes on businesses (people still have to eat, even if less than once upon a time); the poor, who for the very reason they are poor do not have enough money or interest to emigrate elsewhere. Indeed they are being joined by other masses of poor immigrants in search of an Eldorado that lost its lustre long ago, but which, considering the situation in the countries they come from, is still better than nothing.

And so along comes an Italian Finance Bill (imitated also in other countries; it is encouraging to see that our Government leaders have finally learnt to anticipate European trends so well) that resets cadastral valuations and declares outright war on tax evasion on rental income, as if we did not know that in some cases, when faced with the choice of letting an apartment, fully declaring the rental income thereon, or leaving the apartment vacant the latter is quickly seen as the preferable solution.

The taxes and fiscal measures, such as the pre-defined tax scheme, aim directly or indirectly at reducing tax erosion and the income tax evasion of businesses and the poor who, notwithstanding the various shifts in tax rates and the implementation of a number of other pre-election alchemies, are no longer those in the very low income brackets, who probably remain stationary, but those having annual incomes of between 50,000 and 100,000 euros in single-income families with one or two children, who have witnessed a formidable decline in their purchasing power. And all of this well concealed in a one-article Bill with 572 paragraphs and as many implementation decrees, memoranda and regulations, obfuscating the true reasons behind the budget package.

But never fear: to orient ourselves we need go no further than Germany to see the German finance bill, which in fewer articles and clearer words states the same objectives. And the problem is solved.

Goodness knows why our European cousins and non-cousins so obstinately refuse to copy our sophisticated and extremely contorted law-making technique, which boosts the income of the professionals called upon to interpret it and is less likely to irritate certain voters who, not having fully understood, applaud their rulers.

Having thus given vent to my spleen, let me say that unfortunately I have no magic wand or recipe for solving this historical problem, the ingredients of which should in any case be a mix of reforms ranging from the field of morality and the family to the more strictly technical field of labour and taxation. But one thing is certain: it is within the European Union, a road in which politically there is no going back at this stage, given that should it fall apart the ensuing chaos could lead to war, that it is necessary to create a strong central power made up of a politician and a technician entrusted with the task of relaunching the European economy, as is the case in the US with the President and the Chairman of the Board of Governors of the Federal Reserve System, admittedly with the collaboration of a truly efficient political apparatus.

The nationality or office held by the same is of no importance, only the objective unfettered by constraints as to the technical means to accomplish it, which should be created ad hoc as the situation requires.

Unless this is achieved I feel certain that the decline will be inexorable, even though this will not necessarily result – as some catastrophists contend – in the end of European civilization, but only in its marginalization and integration in a global context in which quite different actors will take the leading roles.