Under Italy's programme, homeowners could deduct the cost of the building work from their taxes over a five to 10 year period, or sell the tax credit to their builder as a form of payment. The builder could then sell it on to a bank, which would deduct the sum from its own tax bill.
But due to Eurostat's new rulebook, the credits must be added to the budget deficit in the year they are used, rather than when they materially impact tax revenues, resulting in the upward revisions to Italy's fiscal gap for the three years.
Eurostat's move lies behind Rome's decision this month to sharply curtail the programmes in order not to undermine this year's state finances, despite the boost they had provided to the construction sector and the economy in general. Higher-than-expected gross domestic product (GDP) growth boosts tax revenues and helps limit the negative impact on this year's budget, the official said. The take-up of schemes, including the so-called "superbonus" where the state promised to pay out 110% of the cost of renovations, was greater than expected, generating more than 110 billion euros ($116.39 billion) of renovations against initial forecasts of 72 billion euros. The Treasury expects a slight upward revision of the deficit/GDP ratio in 2020 and heavier in the following two years, especially in 2022, the official added. ($1 = 0.9451 euros) (Reporting by Giuseppe Fonte; Editing by Josie Kao)
