Italy doubles “flat tax” on income earned abroad by wealthy residents

08/15/2024 / By Richard Brown

Calls for increased taxes on the ultra-wealthy are gaining momentum, with conservative governments now joining the debate. In Rome, the government of right-wing Prime Minister Giorgia Meloni has agreed to double the “flat tax” on foreign income earned by wealthy residents from 100,000 to 200,000 euros ($109,200 to $218,400).

The tax was initially introduced in 2017 to attract wealthy investors, resulting in around 1,186 wealthy individuals choosing Italy as their tax residence. The tax became known as the “billionaires tax” or “the footballers scheme” after the personalities that came to Italy following its implementation, including Portuguese football player Cristiano Ronaldo, who moved to Turin in 2018.

By paying the flat tax, residents are exempt from other levies on overseas earnings, gifts and inheritances for 15 years. But flat tax became unpopular among locals, leading to protests arguing that the presence of new, high-income “fiscal residents” has sent housing prices skyrocketing.

Minister of Economy and Finance Giancarlo Giorgetti stated that the country is now opposed to competing with other nations to offer “fiscal favors” to the wealthy.

While Giorgetti did not specifically mention the United Kingdom, it is clear that a significant factor in Italy’s policy reversal was former British Prime Minister Rishi Sunak’s partial abolition of tax breaks for wealthy foreign residents. The change made Italy’s favorable tax treatment look out of step with its European neighbors, especially since newly inaugurated British Prime Minister Keir Starmer pledged to take a tougher approach on wealthy foreign residents who are trying to avoid astronomical taxes.

More nations advocating for higher taxes on the ultra-wealthy

This shift came shortly after 19 former heads of state – including former French Prime Minister Dominique de Villepin and former Australian Prime Minister Julia Gillard – signed a joint letter advocating for heavier taxes on wealth. The recent meeting of the Group of 20 finance ministers’ also emphasized the need for more robust measures to tax the global elite. (Related: Newly empowered French leftist coalition to introduce 90% income tax rate.)

The G20, which was established to coordinate global economic recovery following the 2008 financial crisis, includes members from diverse regions, including Saudi Arabia, Mexico, Turkey, Indonesia, the US, China, France, and the United Kingdom.

Brazil, currently hosting the G20, has placed wealth taxation at the forefront of the agenda under left-wing President Luiz Inacio Lula da Silva. Lula invited French economist Gabriel Zucman to advise on a global standard for taxing ultra-high-net-worth individuals.

Zucman’s report highlighted that billionaires are currently paying an average of only 0.3 percent in taxes on their wealth. He proposed a minimum annual tax of two percent on billionaires’ wealth, arguing that progressive taxation is crucial for democracy.

Implementing a two percent minimum tax on global billionaires could generate $200 to $250 billion annually from approximately 3,000 taxpayers, according to Zucman’s report. Extending this tax to centimillionaires – those with $100 million or more – could raise an additional $100 billion to $140 billion.

Certain nations around the world already have wealth taxes. Norway’s long-imposed wealth tax has been a subject of debate, particularly after Oslo’s left-wing government increased the rate from 0.85 percent to 1.1 percent in 2023, a move that triggered headlines warning about the super-rich leaving the country.

In Spain, the left-wing government reintroduced its own wealth tax right around the same time as Norway’s increase, leading to similar concerns about capital or wealth flight. Spain’s wealth tax applies to fortunes over three million euros ($3.28 million) and can reach up to 3.5 percent, depending on the individual’s wealth.

In Switzerland, where many people fleeing higher taxes have sought refuge, the debate over raising taxes on the ultra-rich is ongoing. Proposals from the country’s very democratically involved society have included a 50 percent inheritance tax on estates worth more than 50 million Swiss francs ($57.63 million) to fund “ecological restructuring.” The Swiss government has announced that it will campaign against this specific tax, but pressure mounts for the country’s ultra-wealthy to pay their fair share.

Watch this video from John Williams discussing a proposal by the Biden-Harris administration to tax the wealth of America’s middle class.

This video is from the ThisIsJohnWilliams channel on Brighteon.com.