Stockbroker Strike

Throughout Italy stockbrokers were on strike last week against the government. All of Italy's ten stock exchanges were closed to protest a new law, effective next week, that will require brokers to report names of all stock buyers and sellers each day. Thus the government hopes to collect taxes that investors have blithely avoided in the past by trading in covert accounts.

Even before the strike started in Italy's two biggest exchanges, Milan and Turin, it was evident that the new law might do more harm than good. Turnover on the Milan exchange, fifth most important in the world (after New York, London, Paris, Zuerich), had shrunk from last year's daily average of 3,000,000 shares to 300,000 before the strike. Although Italian industry is humming at record pitch, the value of stocks listed on the Milan board has been sliced one-third (to 2 trillion lire) since the tax measure was passed by the Chamber of Deputies last December; blue-chip Fiat stock, for example, skidded from 1,845 lire to 1,083 when the strike started.

Many speculators made fortunes by selling short. But thousands of small investors lost heavily in the sliding market. Though Italy can ill afford to lose investment capital, hundreds of millions of dollars have already fled the country.

Italian businessmen are notoriously allergic to taxation in any form. Nevertheless there was weight to their argument that the "law for tax equality," which was passed by a majority of Communist and Socialist votes, will in fact perpetuate inequality. Many big investors intend to keep right on dodging taxes by transferring their holdings to dummy Swiss corporations (which can be set up for only $300 a year in legal fees). Holders of government bonds, savings accounts, etc. totaling $2 billion (v. only $190 million worth of privately owned stock) will still be allowed to play ring-around-a-rosy with the tax collectors. As private capital disappears from the stock market, industrialists fear that they will have to borrow from government-controlled banks instead. The stock market, a major pillar of free enterprise, would thus become an ornamental fac,ade for a socialist economy that is already 40% government-owned. Italian financial leaders have tried to convince the government that a dividend tax levied directly on corporations would be cheaper to collect and harder to dodge. But last week, after a long series of conferences with fellow Ministers, Finance Minister Giulio Andreotti was unable to draft a compromise. At a 17-hour meeting in Rome, stockbrokers from every city in Italy vowed to continue the strike ad oltranza--to the bitter end.

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