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By The complex system of tradeable tax credits that supercharged the sector has ground to a halt, as the government clamps down due to suspicions of fraud, leaving builders unpaid for work done. They and a business lobby group are warning of tens of thousands of bankruptcies and lay-offs which could tip Companies that have not been paid for about seven months have in turn stopped paying suppliers and consultants in a domino effect involving thousands of firms and workers. "We are heading for a disaster, not just for the construction industry but for the whole economy," says The crisis is already starting to emerge in official data. Construction output fell in April for the first time in nine months, building sector confidence in May was the lowest for six months, and the construction purchasing managers' index was the lowest since Also potentially at risk are some of the LIQUIDITY CRISIS The highly vaunted schemes launched in 2020 have turned into a very Italian story of inventiveness, fraud and bureaucracy. Toth, 39, is co-founder of a group called National Construction Class Action, in which hundreds of small building companies like his own exchange messages and lobby politicians to try to keep the incentives alive. Some of the firms, desperate for liquidity, are offering to sell tax credits worth tens of thousands of euros at huge discounts of up to 50%. Under the most generous scheme, known as the "superbonus", the state paid an eye-watering 110% of the cost of making buildings more energy-efficient, from insulation to solar panels to replacing old-fashioned boilers and window fittings. It allowed homeowners to deduct the cost of the building work from their taxes over a five year period, or sell the tax credit to the builder as a form of payment. The builder could then sell it at a discount to another firm or a bank, which could in turn sell it to another, much like any other financial instrument providing liquidity to the system. BOOST TO GROWTH Despite much red tape and frequent tweaks to the rules, the scheme seemed like a roaring success. In November, the European Commission's Other European countries, including Then late last year tax police said they had found suspected fraud worth over That rang alarm bells among policymakers and Prime Minister "We don't agree with the superbonus," he told the European Parliament last month, in an unusual case of a government criticising one of its own policies. Draghi said it had not only spawned swindles but had also driven up costs because clients, knowing they would be reimbursed, had no need to bargain with builders over prices. Industry Minister This is not supported by Eurostat data showing Italian construction cost inflation in the fourth quarter of last year stood at 5.5%, well below the euro zone average of 8.9%. TIGHTER RULES In an anti-fraud drive, Draghi set limits on the number of times the tax credits could be sold from one bank or firm to another, undermining the mechanism the scheme was based on. Regulatory uncertainty and ministers' hostile comments hit confidence and, one by one, the country's largest banks stopped buying the tax credits from customers and builders, leaving them out of pocket for work done. "More than 33,000 firms risk bankruptcy with a loss of 150,000 jobs," says A survey of the group's members this month showed 60,000 firms lack liquidity because they were unable to sell the tax credits they had accepted as payment for work. These blocked credits amount to more than Whether last year's boom turns into a full-blown bust depends on what is decided in the coming weeks. With the economy already stagnant, These include extending the types of firms to whom banks can sell their tax credits to include small businesses with turnover above The construction firm owner Toth said industry data over the summer will be "awful" and the only way to save the scheme is to restore the unlimited tradeability of the tax credits, despite acknowledging some firms may have bent the rules. "Last autumn everything was going so well," he said. "It's been truncated in such a brutal way." ( (Additional reporting by
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