Giavazzi for President !

I want to vote for Francesco Giavazzi. Or maybe I can marry him! Or maybe he can adopt me (or I can adopt him)! What he writes in this article today (translated below) is so fucking true it make me eyes ache !

Not many companies will report a profit this year. But all, even those who will make a loss, will need to pay IRAP, a tax levied not on corporate profits, but on the personnel cost of a company. As an example, a company with revenues of, say, 5 million euro and a personnel cost of 3 million euro must pay about 100k euro for IRAP, which is due even if making a loss.

The paradox is therefore a tax punishing those employers who tried to protect their own employees – the more you used the Cassa Integrazione Guadagni (temporary lay offs), the less IRAP is due.

I know well that IRAP is a regional tax who is used to pay for the healthcare system, but then let’s at least allow companies to consider this part of labour costs (i.e. fully deductible).

This was the promise Silvio Berlusconi made in 2003: “We will cancel IRAP in five years, because it is an unfair tax, punishing labour and those companies who want to grow. When we’ll cancel it we’ll need to find another revenue source, like going back to a healthcare tax, which however will be at least partially deductible”. A promise reiterated in 2008 when the electoral program pf the PDL party promised a “gradual and progressive cancellation of IRAP, starting with the part due on the cost of labour and the tax due when making a loss”.

The Minister of Economy accuses banks of strangling corporate credit and states he does not understand why banks are not using the so-called Tremonti-bonds, for which the 2009 budget set aside 12 billion euro; the reason is however very simple: banks can finance themselves on the market at a lower cost than the one associated with said Tremonti-bonds. It is therefore clear that these 12 billion euros will never be spent.

Why then not to use them to partially cancel IRAP ? I am afraid instead in a few days we will read that this money went to finance the Bank of South, therefore not to the benefit of all italian enterprises, but to the exclusive benefit of the “furbi” (NdT: furbi = clever, astute ones) who will quickly create a fake southern-based entity to draw upon these free financings. It would not be the first time.

True, 12 billions are not enough to cover the IRAP revenue, at least another 20 would be needed. But if the Minister of Economy is truly convinced that companies are desperate for cash, he will also agree that not depriving the economic system of another 30 billions is a great way to ease the credit crunch, and that the increased regular tax revenues will compensate at least part of the lost IRAP revenue.

Francesco Giavazzi

Corriere della Sera, october 14th, 2009, page 1

IRAP is a tax that is reverse-progressive and is due regardless of the profit you make – in other words, instead of taking a share of your corporate profits, the government takes a share of your revenue proportional to the people you employ (the more people you employ, the more is due).

Hello ?!?


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