“Superbonus 110” in Italian
How Bonus Policy Evolves Into Colossal Cheating
By Andrea Affaticati, Milan
02/19/2022, 4:48 p.m
Tax credits in Italy are intended to help the construction industry through the Corona crisis and trigger a renovation of the national building fabric. The intention is commendable, but a billion-dollar fraud is the result. Particularly bitter: A lot of funding comes from an EU fund.
The Italian finance minister, Daniele Franco, who is usually so careful about his words, is more than clear: At a press conference he speaks of “one of the biggest fraud scandals in the republic”. We are talking about tax-reducing aid measures that were approved by then-Prime Minister Giuseppe Conte in 2020 as a result of the pandemic in order to stimulate the construction sector again and at the same time get citizens to make their houses more energy-efficient.
The idea wasn’t wrong. After all, 80 percent of Italians live in a condominium. The plan worked. Unfortunately, with an extremely unpleasant and for the country shameful side effect: a tax fraud of an estimated 4 billion euros. Of this, 2.5 billion euros have now been seized, 1.5 billion euros are considered lost.
But one after anonther. During the first year of the pandemic, the Conte government issued various bonuses, i.e. tax credits, one for facade renovation, another for earthquake-resistant buildings and finally the so-called “Superbonus 110” for a thorough renovation. The latter is now particularly in the sights of the investigators.
Refurbishment for 0 cents
While with the facade bonus, initially 90 percent and then 60 percent of the expenses will be reimbursed as a tax credit by the end of 2021, the super bonus enables homeowners to refurbish their properties from roof to basement in an energy-efficient manner without spending a cent. Because the designation Superbonus 110 means that 110 percent of the costs are covered by a tax credit, which means that they are covered by the state. Theoretically, a profit margin of 10 percent is even included.
The bonus can be reimbursed in two ways: either it is deducted from the taxes to be paid over a period of ten years – an option that few consider – or it is used as a means of payment, which the majority prefer. Instead of paying the contractor, the client transfers their tax credit to them. The company, in turn, can pass it on to a third party as payment. Which is absolutely legal and assumes no fraudulent intent.
And this is exactly where the catch is, which also explains why so many see a lucrative business. As the President of the Association of Italian Construction Companies recently pointed out, 1,600 new companies have sprung up like mushrooms in the last year alone. Nothing is easier in Italy than starting a construction company.
A certificate that proves the professional competence is not necessary for this. Not surprisingly, many of these new construction companies are shell companies that have neither employees, let alone ever carried out renovation work, as the investigators found. The Treasury did not ask for any proof of the work done. So the tax bonuses were sold profitably from one to the other – and in the end presented to the banks for collection.
EU funds also sold off
So far, the Italian state has spent 38 billion euros on this bonus policy, 14 billion of which comes from the EU recovery fund for increasing energy efficiency. This also explains Mario Draghi’s harsh reprimands a week ago in the direction of the Five Star Movement: “Especially those who demand that things continue as before wrote the law that made it possible to wave construction and renovation orders through without any checks.” , scolds the Prime Minister.
He himself wanted to let the Superbonus expire last year, but ultimately had to bow to opposition from the parties. It was precisely these tax rebates that got the industry back on its feet, she objected. Above all, the Five Star Movement, which pushed through this bonus, fought back and even now does not want to hear about measures that regulate trading with the tax credits more stringently.
Nonetheless, these will come. In the future, the bonus may be passed on a maximum of three times and only collected from banks and financial intermediaries that are listed in a register of the Italian central bank. In addition, a default date for the Superbonus 110 is to be set, as well as a gradual reduction in the tax credit.