ITALY: POLICY MEASURES AGAINST THE COVID-19[1]

SUMMARY: 1.- Introduction. 2.- Expenditure measures. 2.1.Healthcare measures. 2.2. Job protection measures. 3.- Tax measures. 4.- Sectorial, regional, or measures other than fiscal. 4.1. Public guarantee on loans. 4.2. Other measures to support firms. 4.3. Support to specific sectors. Transport.  Publishing industry. Agriculture. Tourism.  Made in Italy. Education. Culture. Territorial cohesion. 5.- Other measures.

1.  INTRODUCTION.

The Italian Government has taken several packages of measures to support the health sector, firms, workers and families, since the outbreak.

In The First Phase, packages focused on measures aimed to reinforce the public health sectors and suspend tax payments and contributions in the areas of the Country subject to a total closure in that period.

They include:

– Law Decree of March, the 2nd , n. 9/2020, containing urgent support measures for families, workers and businesses;

 – Law Decree of March, the 9th, n. 14/2020, containing measures to strengthen the national healthcare system and civil protection; several Decrees of the President of the Council of Ministers and Civil Protection ordinances with emergency measures for the containment and management of the epidemiological emergency of the coronavirus.

In The Second Phase, packages aimed at tackling the economic and social consequences of the Covid-19 emergency supporting the economy, preserving employment levels and incomes and strengthening Italian businesses. They also provided extra funding to protect citizens’ health.

They included:

-Law Decree of March, the 17th, n. 18/2020 (“Cura Italia” decree) converted into Law no. 27, dated 24 April 2020,  accounting for EUR 20 billion of net borrowing. It includes measures to strengthen the national health system and for the economic support of households, workers and firms;

-Law Decree of April, the 8th, n.23/2020 (“Liquidity” decree), converted into Law no. 40, dated 5 June 2020, containing liquidity and fiscal measures to support the country’s production system.It includes measures that are intended to assist businesses by providing loan guarantees, government assumption of non-market risks, and certain targeted tax relief; containing liquidity and fiscal measures to support the country’s production system;

– Law Decree of May, the 19th n. 34/2020 (“Recovery” decree), converted into Law no. 77, dated 17 july 2020, containing measures on healthcare, economy, jobs and social policies (EUR 55 billion in terms of net borrowing). The total amount of the economic support package in 2020 is equivalent to 4.5% of GDP, plus guarantees for around 40% of GDP. With regard to the State budget’s net balance to be financed, both accrual based and cash based, the effects of the decrees (“Save Italy” and “Recovery”) amount to EUR 180 billion in 2020 and EUR 25 billion in 2021. Considering the effects on public finances of these measures and the deteriorating macroeconomic scenario, the projected level of general government net borrowing requirements reported by the Economic and Financial Document 2020 is set at 10.4% of GDP in 2020 and 5.7% in 2021. The projected level of government debt is 155.7% of GDP in 2020 and 152.7% of GDP in 2021.

2. EXPENDITURE MEASURES

2.1.Healthcare Measures:

(i) 845 mln funding for extraordinary hires in the healthcare system and purchase of medical devices (Law Decree n. 14/2020);

(ii) Identification of coverage of the hiring of the already planned hiring of 20.000 workers in the national health system;

(iii) Increase of EUR 1.65 billion for the Fund for National Emergencies;

(iv) Increase of the fund for overtime of health workers by EUR 150 mln;

(v) EUR 340 mln to increase hospital beds and intensive therapy;

(vi) Invitalia provided specific support to firms for the production of medical products (such as masks) for EUR 50 mln;

(vii) The seizing of properties that are needed for emergency health care needs;

(viii) The use of military healthcare system to counter the disease. EUR 64 mln to increase military health workers;

(ix) Additional funds for civil protection, fire brigade and security forces;

(x)Graduates in medicine can practice immediately after the degree;

(xi) EUR 8.1 billion for 2020 for the strengthening and re-organization of healthcare. This includes: EUR 1.4 billion for the strengthening of hospital infrastructures such as hospital beds, including in ICU; territorial assistance and healthcare structures for home-based care patients, including the hiring of nurses; EUR 1.5 billion increase of the fund for emergencies.

2.2. Job Protection Measures:

(a) Early Measures: Additional resources for the wage supplementation scheme, aimed to safeguard jobs before workers are dismissed, for the most affected municipalities. Monthly allowance of EUR 500 for up to 3 months for selfemployed workers in the municipalities most affected at the end of February (Law Decree n. 9/2020)

(b) The social safety net has been widened and strengthened by two main packages:

(bx) the ”Cura Italia” decree that allocated around EUR 10 billion to protect employees by easing and widening the wage supplementation scheme in every productive sector, including businesses with less than five employees; protect self-employed and seasonal workers by providing a one-month (March) allowance of EUR 600; extend some specific social benefits such as paid leaves for caregivers and parents and introduce temporary measures of income support;

(by) the “Recovery” decree that allocated around EUR 25 billion aimed essentially at extending the measures included in previous legislation to support workers and households, providing some simplifications in order to improve the rapidity of social benefit disbursements to recipients. More details on the measures are illustrated in the points below.More details on the measures are illustrated in the points below

(c)The wage supplementation scheme in all its variations (ordinary, extraordinary and in derogation) has been streamlined and extended across the country to cover for firms of any size and sector. The ”Cura Italia” decree provided to all these firms and their workers 9-extra weeks of wage supplementation, and the “Recovery” decree added 9 weeks more (totally: 14 weeks to be used within August, the remaining 4 from September on). Red tape problems have also been addressed in the Recovery, by providing an easier and shorter processing for wage supplementation claims by the employers, particularly for the derogation scheme that previously involved the Regions and witnessed serious delays. Lately, the 31 august date for the last 4 weeks has been canceled (June).

(d) A one-off EUR 600 allowance was introduced for March by the ”Cura Italia” decree for the self-employed and for employees not covered by specific income support schemes, such as seasonal workers or workers in the sport and entertainment sectors. The “Recovery” decree extended the measures, originally intended as non-means-tested and covering nearly 5 mln eligible workers, to the month of April, and to home-care workers. Starting from May, the “Recovery” decree provided a different, means-tested, eligibility system based on profits lost during the emergency (comparing the turnover in MarchApril 2020 with the same period in 2019, with partial compensation of at least 33% of profit lost depending on the firm size). For the eligible workers only, the May allowance is raised at EUR 1 000. The new system covers self-employed workers not enrolled in professional orders and atypical employees; the allowance is raised to EUR 1 000 for seasonal workers in the tourism sector; the EUR 600 allowance remains for other employees (such as sport and entertainment workers) and it is lowered to 500 for agricultural workers; selfemployed in the retail trade and craft sector, as well as self-employed farmers, are excluded since the “Recovery” decree has shifted these workers to an help program for firms (amounting up to 20% of the revenue loss, and a minimum of EUR 1 000)

(e) EUR 300 mln fund for last resort income to cover all those not covered by the other measures, included the professionals enrolled in orders (“Cura Italia” decree). The fund has been extended by the “Recovery” decree to April and May and raised it to EUR 1.1 billion. This includes transfers to the social security funds of the self-employed enrolled in professionals orders (such as lawyers, engineers, etc) to finance an allowance similar to the EUR 600, and its later development.

(f) The unemployment benefit has been extended by the “Recovery” decree, by providing 2 extra months for those who see their ordinary income support expire in March and April.

(g)A new EUR 230 mln Fund has been set by the “Recovery” decree for workers vocational training

(h) Emergency income (min EUR 400, up to EUR 840 in case of households with persons affected by disabilities) for maximum 2 months for households in need following the crisis (“Recovery” decree).

(i) The paid parental leave for private employees and self-employed has been raised by 30 extra days (15 in ”Cura Italia” Decree and 15 in ”Recovery” Decree) to be used until July. The 30% replacement rate of the ordinary benefit has been raised up to 50%. Introduced one-off contribution of EUR 1,200 for recourse to babysitters (increased to EUR 2 000 for parents working in the health sector); the baby-sitting voucher can be spent for summer camps and similar activities (“Recovery” decree).

(l) Quarantine of the workers in the private sector will be treated as sick leave (extended until July)

(m) Paid leave for persons affected by disabilities or for caregivers who assist people affected by disability has been extended by 12 days for March and April and for additional 12 days for May and June, for a total of additional 24 days

(n) Suspended prescriptions for beneficiaries of the citizenship income, required by law to follow a path of social and work reintegration

(o) Measures for home office: default status along the whole emergency period in the public administration and for parents employed in the private sector. Those with at least one dependent child under the age of 14 will have the right to work from home provided that this is compatible with the characteristics of their tasks.

(p)Suspension of job dismissals (for a five-month period).

(q) One-off tax free premium of EUR 100 monthly for people who went to work in March and with yearly income below EUR 40 000 (it is paid since April).

(r) Measures to address undeclared work: Italian employers or citizens of a Member State of the European Union, or foreign employers holding a residence permit, may submit applications to conclude a subordinate employment contract with foreign citizens present in the Italian territory or to declare subsistence of an ongoing irregular employment relationship with citizens Italians or foreign citizens. The regularization of foreign workers can be done through the payment of a lump-sum contribution (EUR 500 for each worker). Foreign citizens can request a temporary residence permit, valid only in the Italian territory and lasting 6 months. The norms may apply to about 176 000 workers (“Recovery” decree).

3. TAX MEASURES:

(a) Early measures: Suspension for 3 months of tax and social security payments in the municipalities most affected (DM 24/02/2020 – Law Decree n. 9/2020). Suspension of VAT payments for firms and self-employed with revenues of less than 2 mln who are residents in the provinces of Bergamo, Brescia, Cremona, Lodi and Piacenza

(b)Postponement of tax and social security payments for the tourism sector until 31st of May

(c) Suspension until September of tax and social security payments due in April and May for firms and self-employed that recorded in March and/or April compared to 2019: a 33% drop in turnover with revenues of less than EUR 50 mln, or a 50% drop in turnover with revenues of over EUR 50 mln.

(d) Deferred payments of all the above mentioned tax payments until September will not include penalties and interest, and there is the possibility to pay in instalments thereafter.

(e) Suspension of tax and social security payments for start-ups.

(f) 50% tax credit for expenditures for sanitations and securization of workplaces,  up to EUR 20 000 per beneficiary, providing for an accelerated procedure; 60% tax credit for ensuring safety in work places and commercial activities open to public, up to EUR 80 000 per beneficiary; tax credits for the sanitisation of working places and for research and innovation in the South of Italy (“Recovery” decree).

(g) Exemption from VAT on protection and safety devices in 2020, and reduction to 5% VAT afterwards.Tax credit of 60% of the rent for the month of March, April and May for businesses and self-employed up to 5 million revenues who recorded a 50% drop in April turnover. Hotels and agritourism facilities can take advantage of the credit regardless of the size and turnover reduction. Deductibility of donations for the emergency up to a max of EUR 300,000.

(h) 2 years postponement of tax verifications for the tax year 2015; further postponement to September of payments for past tax liabilities emerging from audits (“Recovery” decree).

 (i) Incentives to the use the forecast method (instead of the historical one) for tax advances (tax advances from firms and self-employed can be based on the expected income in 2020, with no penalties up to 80% of underestimation of the actual income).

(l) Financial allowance to small firms and self-employed workers (with turnover in 2019 below EUR 5 mln) who recorded a significant drop of turnover (above 1/3) in April 2020 compared to April 2019. The allowance is a share of the drop recorded and ranges from 10% to 20% depending on the overall turnover (providing stronger contributions to smaller firms).

(m) EUR 4 billion for the abrogation of the regional tax on productive activities due in 2020 (balance payment for 2019 and advance payment for 2020) for firms and self-employed workers with yearly turnover up to EUR 250 000.

(n) Exemption from first instalment of the property tax (IMU ) for 2020 for hotels and other reception facilities.

(o) Exemption from ground occupation taxes (TOSAP and COSAP).

(p) An additional tax credit for firms’ capital uplifts.

(q) Abrogation of VAT safeguard clauses in 2021 (EUR 20 billion).

 (r) 110% (transferable) tax credit for energy efficiency (Ecobonus) and seismic risk reduction (Sismabonus) on works taking place in the second half of 2020 until the end of 2021.

(s) Postponement of the automatic stamp tax on electronic invoicing.

(t) Postponement of the new taxes on sugar and plastic.

(u) Postponement to January 2021 of the “lottery of receipts” (aimed at discouraging omitted billing).

(v)Tax credit for holidays (from EUR 150 to EUR 500 depending on household’s composition) for households with yearly income below EUR 40 000.

(z) Tax credit for R&D activities for enterprises in Southern Italy: 25% for large enterprises; 35% for medium sized enterprises and 45% for small sized enterprises

4. SECTORIAL, REGIONAL MEASURES, OR MEASURES OTHER THAN FISCAL

4.1. Public Guarantee On Loans

– Early measure: One-year suspension in the repayment of the loans allocated by Invitalia and allocation of EUR 50 million to support SMEs in the municipalities most affected by the end of February; up to 18 months suspension in the repayment of real estate mortgages by workers having lost, or been reduced, their job (Law Decree n. 9/2020)

– A moratorium on mortgage payments for the first residence and loans to individuals in financial distress, including self-employed workers (additional EUR 400 million for 2020 in the already existing fund Gasparrini) The “Cura Italia” decree introduced a state guarantee, worth around EUR 3.5 billion (0.2% of GDP) on: 1) up to one third of the total financing received by SMEs (or 1 500 EUR per SME) in case of their extension/suspension under specific conditions (e.g. both for bullet-loans and for loans reimbursed in instalments, the payment of the principal or any instalment is suspended until end-September 2020 at the same conditions). 2) up to 80% on the liquidity granted, via banks and other financial intermediaries, to firms facing a sharp decline in turnover by Italy’s national promotional institution “Cassa Depositi e Prestiti SpA”, also as guarantees.

– The “Cura Italia” decree strengthened the SME Guarantee Fund (through additional EUR 1.5 billion) up to EUR 5 million on loans to SMEs in distress for the nine months following the decree; This fund was substantially increased by the “Liquidity” decree (most likely to EUR 7 billion, but could be further increased to EUR 10 billion). Procedures to access the guarantees from the Fund for SMEs have been substantially eased. Financing below EUR 30,000 will benefit from a 100% guarantee and will not require prior assessment; financing up to EUR 800,000 and for business with a turnover below EUR 3.2 million will also benefit from a 100% guarantee but will be subject to prior assessment. Above that threshold and up to EUR 5 million turnover, the guarantee will be 90% and a prior assessment will be required. Moreover, the Central Guarantee Fund will be also allowed to provide guarantees to Small MidCaps (up to 499 employees). The “Recovery” decree refinanced the SME Guarantee Fund by an additional 3.9 billion euros for 2020, for the already envisaged purposes of strengthening and extending the relative scope of operations.

– The “Liquidity” decree contains new public guarantees to support credit to business aimed at mobilizing up to EUR 400 billion (more than 20% of GDP): A) 200 billion for all firms hit by the crisis and B) up to 200 billion for exporting firms. A) The guarantee will be provided by SACE to banks and other financial institutions to facilitate the provision of new loans in any form to firms. EUR 30 billion of the SACE guarantee will be reserved to SMEs and self-employed that have exhausted the credit facility provided under the Central Guarantee Fund for SMEs. The new general guarantee for firms will cover 70% to 90% of the amount financed, depending on the dimension of the firms, and will be subject to conditionality: the financing will have to be spent for activities on the national territory and the firms cannot distribute dividends for 12 months, the guarantee cannot exceed 25% of the turnover reported for 2019. The size of the new guarantee will depend on firms’ turnover: 1) Business with a turnover below EUR 1.5 billion and less than 5000 employees will benefit from a 90% guarantee and will be granted a simplified access procedure; 2) Business with a higher turnover will be subject to an assessment procedure. The guarantee will be 80% for firms with a turnover below EUR 5 billion while 3) the guarantee will be 70% above that threshold. B) Enhancement of public support to export by introducing a co-insurance system according to which the commitments deriving from SACE’s insurance schemes are assumed by the State for 90% and by the same company for the remaining 10%. The D.L. n. 34/2020 “Relaunch” then authorized SACE to provide guarantees in favor of insurance companies of the credit branch on the indemnities generated by the exposures relating to short-term commercial credits accrued from 19 May 2020 (date of entry into force of the decree law) until December 31, 2020, within the maximum limit of 2,000 million euros. The guarantee operates on 90% of the indemnities. The state guarantee also operates on SACE’s commitments in this case

– The “Recovery” decree has set up a fund for the support and relaunch of the Italian productive economic system, called the “SMEs Patrimony Fund” (“Patrimonio PMI”) aimed at subscribing newly issued bonds or debt securities of SMEs.

– Public guarantee on bank liabilities compatible with state aid for up to EUR 15 billion; public support to facilitate orderly conduct of any compulsory administrative liquidation procedures of banks other than “credito cooperativo”, with total assets of EUR 5 billion or less to grant public support to an acquiring bank for the transfer operations of assets and liabilities (“Recovery” decree).

4.2. Other Measures To Support Firms

– Firms’ credits with respect to debtors who do not pay can be transformed in tax credits (“Cura Italia” decree)

– Nine-month mortgage relief for self-employed and professionals that recorded a fall in turnover by more than a third. For companies with a turnover over EUR 10 million implementing capital increases over EUR 250 thousand, there is the possibility to issue financial instruments that can be bought by the newly created “SMEs Assets Fund”, handled by the public agency Invitalia. Additional norms are introduced to simplify and accelerate venture capital operations (“Recovery” decree). Support to larger companies (with annual turnover up to 50 million) through CDP, via the creation of a dedicated pool of resources (EUR 45 billion), called “Re-launch Assets”, for operations in line with the state aid temporary framework / at market conditions. The interventions will concern stock companies, including listed companies, which have their registered office in Italy, do not operate in the banking, financial or insurance sectors and have an annual turnover of over EUR 50 million

– EUR 100 million fund for 2020 for SMEs, to support employment levels, financial viability, internationalisation, and technological advancement, as well as support to start-ups

– Suspension of 2 months (until end of April) in the payment of the electricity, gas, water and waste bills in the municipalities most affected by the end of February (Law Decree n. 9/2020); reduction in electricity bills for all nondomestic uses (“Recovery” decree)

– The “Recovery” decree provides for multiple interventions to strengthen innovative start-ups, including assets. In particular:

a) refinances the “Smart & Start Italia” measure of EUR 100 mln for 2020, allocating resources to subsidized loans for start-ups;

b) allocates EUR 10 mln for 2020 for non-refundable grants to innovative start-ups aimed at the acquisition of services provided by incubators, accelerators, innovation hubs, business angels and other public or private entities operating for the development of innovative companies;

c) the refinancing of the venture capital support fund with EUR 200 mln for 2020;

d) reserves a share of EUR 200 mln euros of the resources already allocated to the Guarantee Fund for small and medium-sized enterprises, to the issue of guarantees in favor of startups and innovative SMEs

The “Recovery” decree also intervenes on the problem of late payments to companies by public administrations, establishing a Fund, with a budget of EUR 12 billion for 2020, to ensure an advance on liquidity destined to the payment of certain commercial debts, liquid and collectable from Regions, autonomous provinces, local bodies and entities of the National Health Service.

4.3. Support To Specific Sectors

-Transport: Support to railways (reduction of rent for infrastructure), airlines and ports, in particular for Italian stations, and a fund for local public transport. Pilot program for a mobility voucher to support sustainable transport (e.g. 60% contribution to buy bicycles); introduction of reimbursement for commuters using sustainable transport and for transport passes during the lockdown; reduction of highway fees.

-Publishing industry: tax credits for advertisement and expenses incurred in 2019; a flat contribution of EUR 500 for newspaper kiosks; better conditions on VAT reimbursement for 2020.Sport: suspension of rents and concessions for sport associations until June 2020; possibility to renegotiate concessions for 2020; reduction of related rents over March-July 2020. A share of betsrevenues related to sport activities will be used to support the whole sector.

-Agriculture: EUR 500 million emergency fund for 2020 to support agricultural subsectors affected by the crisis (e.g. due to the reducing in export of fresh products).

-Tourism: EUR 50 million Fund for Tourism to support purchase and restructuring of immovable properties used for tourism; EUR 30 million fund to promote tourism in Italy; EUR 50 million fund to comply with the safety protocol for tourist activities (“Recovery” decree); tax exemption for hotels and other touristic buildings and for bar and restaurants for temporary occupation of public soil.

-Additional EUR 150 million for Made in Italy and some simplifications

-Education: Contributions for remote education (EUR 85 million). Fund for universities (EUR 50 million) to be allocated through a (MIUR) decree. A EUR 350 million allocation to help exporting firms (Law Decree n. 9/2020). The “Recovery” decree allocates additional resources for education: i) for universities and national research institutes, including the additional recruitment of 4,000 researchers; ii) for the school system and to ensure safe conditions for education, including for hygiene (EUR 330 million).

-Culture: a special fund of EUR 225 million for book shops, publishing industry and and cultural activities. A special fund of EUR 100 million for museum.

-Territorial cohesion

-Higher thresholds for subnational governments to provide support to firms and exemptions from some accounting rules and deadlines to free up room for measures of fiscal stimulus.

-A fund of EUR 3.5 billion to be divided among regions, provinces and cities to fulfil their basic functions in the current exceptional context.

-An increase of the solidarity fund (EUR 400 million) to reduce inequalities across cities

5. OTHER MEASURES

– The Italian Government declared the National State of emergency for allowing the Civil protection to take the necessary measures to counter the Coronavirus outbreak (31st of January) until 31th of July.

– Since 12th March to 3rd of May it legislated a nationwide restriction on public gatherings and the lock down of all commercial activities providing not necessary and essential goods and services. The essential public services remain guaranteed including public utilities, transport, postal, banking, financial and insurance service, as well as agro-industrial activities and those sectors providing intermediate goods and services to the above-mentioned activities.

– Since 14th of April some retail businesses have been opened: bookshops, stationers, children’s and infants clothing products, personal hygiene, home hygiene, perfumeries, computers, electronics spare parts, specialized medical products and orthopaedic products, optics, photography, laundries and hardware stores.

– Starting from May 18th , most of economic, productive, and social activities are resuming, in compliance with protocols and/or guidelines aimed at preventing or reducing contagion. Strict guidelines remain in place, from social distancing to the obligation to wear masks in closed spaces and on public transport, along with a ban on gatherings.

– Starting from June 3rd, no limitations are set for trips within the country, including between different regions, and to/from other countries within the European Union and the Schengen area.Measures already adopted postponing civil, penal and administrative trials are extended until July.

– Restoration of jail situation (after disorders), such as home jail for inmates with less than 18 months sentence.

– Measures for food provisions for the poor (EUR 400 mln).

[1] Source: European Commission Directorate General Economic And Financial Affairs (20 July 2020). Revised by the Editorial Staff.