Italy open to changing planned 'exit tax' on the rich, after criticism

Italy Considers Modifying Exit Tax for Wealthy After Financial Sector Criticism

Overview of Italy's Proposed Exit Tax and Its Implications

Government's Position and Potential Revisions

ROME, Nov 5 (Reuters) - Italy is ready to consider changes to its exit tax on wealthy individuals leaving the country, Deputy Economy Minister Maurizio Leo told Reuters, after the proposed levy sparked criticism from tax experts and financial advisers.

Details of the Proposed Exit Tax

Scope and Revenue Expectations

Next year's budget announced last month by Prime Minister Giorgia Meloni envisages a 26% levy on the capital gains of the wealthy who transfer their tax domicile abroad and hold financial investments worth at least €800,000 ($900,880.00).

The Treasury expects a modest €3.4 million of higher revenue in 2027 stemming from the measure, rising to €6.7 million the following years.

Government Openness to Dialogue

"Italy is happy to consider proposals to improve the exit tax, we are always open to dialogue," Leo said when asked about the possibility that the government might review the structure of the tax.

Reactions from Financial Sector and Wealth Advisers

Concerns Over Italy's Attractiveness

Wealth advisers said the exit tax could hurt Italy's appeal to their clients, reversing efforts by Meloni's predecessors to lure affluent individuals.

Existing Tax Incentives for Wealthy Individuals

Flat Rate Tax and Expatriate Incentives

The wealthy who transfer their tax residence to the country can currently pay a flat rate of €300,000 per year on foreign-sourced income. A separate scheme of tax incentives is designed to lure well-off expatriates back home.

These tax breaks have helped Milan emerge as a top relocation hub, heating up its housing market and exacerbating the cost-of-living for ordinary people.

Additional Budget Measures and Criticism

Meloni's last budget before national elections next year also triggered criticism from some quarters for doubling an existing tax on financial transactions, worth an additional €1.38 billion per year for the Treasury's coffers.

Debate on Wealth Taxes and Inequality

Arguments from Wealth Tax Advocates

Advocates of wealth taxes point to growing inequality, with top earners becoming richer while real wages stagnate for low- and middle-income workers.

The top 10% of Italian households held 60% of net household wealth in 2023, up about 7 percentage points from 2010, according to data from the Bank of Italy.

Additional Information

($1 = 0.8880 euros)

(Reporting by Giuseppe Fonte and Giselda Vagnoni in Rome, additional reporting by Giulio Piovaccari in Milan, editing by Gavin Jones)