Italy has stopped a climate-friendly tax credit system that helped fuel the country’s post-pandemic rebound but caused spiraling costs already exceeding €110 billion ($117 billion) and widespread fraud.
(Bloomberg) — Italy has stopped a climate-friendly tax credit system that helped fuel the country’s post-pandemic rebound but caused spiraling costs already exceeding €110 billion ($117 billion) and widespread fraud.
The halt was necessary to counter a “reckless policy” that threatened the solidity of public finances, Finance Minister Giancarlo Giorgetti told reporters late Thursday.
Read More: Italy’s Push to Create Greener Cities Led to $5 Billion in Fraud
Over the years, and particularly after the end of the Covid-19 lockdown, Italy introduced a raft of programs aimed at making properties greener, upgrading roofs and facades as well as buying efficient gas heaters.
The most generous program, known as the “superbonus,” offered a tax break worth 110% of the amount spent, which could be turned immediately into cash. The tax credit could also be exchanged between banks, companies and financial institutions indefinitely and with no tracking.
Prime Minister Giorgia Meloni’s cabinet approved Thursday an urgent law that immediately ends the tax-credit trading scheme, but should guarantee that renovations already underway are completed.
The decision was criticized by the opposition Five Star Movement, which had introduced the superbonus system under then-Premier Giuseppe Conte. While the tax credits boosted economic activity, they benefited mostly affluent city centers.
Meloni’s predecessor Mario Draghi had already tried to tighten what he called a “system without checks,” with authorities suspecting that as much as €4.4 billion had ended up in the hands of criminals. The system was also deemed responsible for a glut in demand for the construction sector that drove up costs for materials and equipment.
A Bank of Italy study warned last year that “the superbonus is not a cost effective way to contrast climate change.”
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