Flat Tax for Wealthy Immigrants Doubled
The Italian government has recently approved a decree that significantly alters a tax incentive designed to attract wealthy individuals to transfer their tax residency to the country. The flat tax applied to income earned abroad by these individuals has been doubled from 100,000 euros to 200,000 euros per year.
From Allure to Austerity: A Change in Perspective
Introduced in 2017 under a centre-left government, this incentive aimed to entice affluent individuals to Italy, with the hope that their presence would stimulate the economy. However, Economy Minister Giancarlo Giorgetti has expressed a shift in perspective, stating that Italy is now opposed to countries engaging in a “fiscal race to the bottom” to attract the wealthy through tax breaks.
Fiscal Responsibility Amidst Economic Challenges
This decision to double the flat tax aligns with Prime Minister Giorgia Meloni’s commitment to fiscal responsibility as she prepares the 2025 budget aimed at reducing the country’s substantial fiscal deficit. While the measure may not generate substantial revenue, it is seen as a step towards a more balanced and sustainable fiscal policy.
High-Profile Beneficiaries and Tax Revenue
The flat tax scheme has attracted a notable number of wealthy individuals, including Portuguese football star Cristiano Ronaldo, who took advantage of it during his time playing for Juventus. Approximately 1,186 taxpayers have benefited from the scheme, generating an estimated 254 million euros in tax revenue between 2018 and 2022, according to Italy’s audit court.
European Union Criticizes Fiscal Policy
The European Union has voiced criticism of the flat tax measure, deeming it inequitable and detrimental to state finances. The EU’s Tax Observatory, in its Global Tax Evasion Report, identified the high-net-worth individual regimes in Greece and Italy as the most harmful, as they offer substantial exemptions to the extremely wealthy.
Summary
The Italian government has doubled the flat tax applied to income earned abroad by wealthy individuals who transfer their tax residence to Italy. This decision reflects a shift away from competing with other countries through tax incentives and towards fiscal responsibility. While the measure may not yield significant revenue, it is viewed as a step towards a more balanced fiscal policy. Despite attracting high-profile beneficiaries like Cristiano Ronaldo, the flat tax scheme has been criticized by the European Union for its inequity and potential negative impact on state finances.
Key Learning Points
| Point | Description |
|---|---|
| Flat Tax Doubled | Italy doubles the flat tax for wealthy immigrants to 200,000 euros per year. |
| Shift in Fiscal Policy | The government moves away from competing with other countries through tax incentives. |
| Fiscal Responsibility | The decision aligns with efforts to reduce the country’s fiscal deficit. |
| High-Profile Beneficiaries | Cristiano Ronaldo and 1,186 other taxpayers have benefited from the scheme. |
| EU Criticism | The European Union criticizes the flat tax measure as inequitable and harmful to state finances. |
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