Locals had criticized the previous tax rules after wealthy expats’ purchases of property in Italy led to a sharp rise in property prices.
ADVERTISINGThe Italian government has agreed to increase the annual flat-rate tax on income earned abroad by individuals who have newly established their tax residence in Italy.
The annual fixed fee will increase from the current 100,000 euros to 200,000 euros.
The tax system is unpopular with locals and is unofficially known as the “billionaire tax” or “footballer’s program.” It is believed to have attracted thousands of multimillionaires to Italy.
A prominent beneficiary of this system was the Portuguese football player Cristiano Ronaldo, who moved to Turin in 2018.
By paying the flat tax, residents are exempt from other taxes on income, gifts and inheritances earned abroad for 15 years.
When the tax incentive was introduced in 2017, Italian politicians hoped it would benefit the economy by attracting wealthy individuals who would then spend their money in Italy.
Nevertheless, Economy Minister Giancarlo Giorgetti stressed on Wednesday that Italy now rejects the idea of competing with other countries for “tax breaks” for the super-rich.
A fiscal “race to the bottom” between countries is a phenomenon that is explicitly rejected by major organizations such as the OECD and the IMF.
While countries can benefit from the presence of wealthy individuals and companies on their territory, overly generous tax breaks can increase inequality, undermine public services and lead to regional imbalances.
Doubling the flat tax will also help Italy get its budget deficit under control.
Under the government of Giorgia Meloni, the deficit last year was 7.4 percent of gross domestic product.
This was well above the EU target of three percent of GDP and prompted the European Commission to initiate disciplinary proceedings.
It is still unclear how much money the tax increase will actually raise.
