Yahoo Finance How Italy shook off its ‘basket case’ brand – and stole Britain’s millionaires
When Giorgia Meloni took to the stage to deliver a landmark tax speech to Italian legislators earlier this year, she launched an impassioned defence of how the ultra-rich should be treated.
Dressed in a sober black blazer and talking with trademark briskness, the prime minister urged Italy’s ruling elite to “put those who create wealth in the best conditions to produce it”.
“The more wealth that is produced, the more the state can use its share of that wealth to provide the solutions citizens are waiting for,” she said. “The purpose of a tax system is not to stifle society, but rather to help it prosper.”
The message underlined Meloni’s fierce bid to shake Italy out of years of stagnation and return it to its post-war economic heyday.
Now, as Sir Keir Starmer mulls a series of wealth tax rises on the ultra-rich in the UK, and France battles political uncertainty, her reforms to put Italy back on the map are bearing fruit.
In recent months there has been a growing proportion of the super-rich flocking to Italy, drawn by Meloni’s reform agenda.
The Milan stock market, a barometer for confidence in Italy, is also outstripping its European rivals this year, with the Italian economy growing faster than industrial powerhouse Germany.
The shake-up marks a stunning reversal of fortunes for a country once derided by critics as an economic basket case.
To achieve this turnaround, Italy has sought to appeal to the billionaire and millionaire classes by introducing a €100,000 (£85,000) annual flat tax charged on income earned abroad.
The attractiveness of this flat tax on foreign earnings has already led to an influx of people seeking to take advantage of the scheme – more than policymakers were expecting.
In total the number of people moving to Italy who qualified for the scheme reached 4,000 last year, Bloomberg reported – with this figure expected to rise by another 2,000 in 2024.
Since becoming prime minister two years ago Meloni has sought to build upon the pro-business tax regime introduced by her predecessor Matteo Renzi.
However, her policies have been given renewed appeal as a growing number of the super-rich are quitting Britain in search of lower-tax economies overseas.
Driving this shift has been the UK’s move to abolish non-dom status, a policy first proposed by the Tories but soon set to be toughened up by Labour if it succeeds at the general election on Thursday.
Under non-dom plans laid out by the Tories in the Budget, individuals who arrive in the UK will not have to pay any tax on overseas earnings for four years. After this, they will pay ordinary income taxes on their overseas earnings.
However, if Labour clinches power on July 4 it plans to go further.
Fears of a tax clampdown have already led to many well-heeled investors choosing to set up trusts to shelter their non-UK wealth from UK taxes, while others have quit the country altogether.
Peter Ferrigno, director of tax services at Henley & Partners, said the Italian tax regime was “attracting a lot of interest” owing to some of the UK changes.
According to Henley & Partners, which advises high-net-worth individuals, Italy is expected to lure an additional 2,200 millionaires in 2024, making it the wealthy’s most desired country destination in Europe.
Ayesha Vardag, a City lawyer who represents the super-rich in lucrative divorce battles, said she has already seen a flood of clients quitting Britain amid fears of Sir Keir raising taxes.
As well as moving to the likes of Dubai and Monaco, she adds that Italy has emerged as “one of the main beneficiaries”.
Paris too has often been where most billionaires flee when the UK targets their taxes.
However, the political chaos currently engulfing France because of the popularity of the hard-Right National Rally has cast a shadow over the City of Light.
In contrast, Meloni and Italy appear increasingly a safe haven.
Despite fears about her populist allegiances, Meloni has ruled as a Right-wing moderate, toeing the line in Brussels, supporting Nato and keeping markets happy with her economic policies.
And while Italy still has Europe’s largest debt pile at € 2.9 trillion, her pro-growth agenda has kept investors on-side.
Yet it is not all to do with economics, as other, softer considerations are also making Milan the new go-to destination for the super-rich.
While London may boast small pockets of luxury in tiny districts like Mayfair and New Bond Street, Milan oozes luxury brands at every turn, further tempting the high rollers to decamp.
Milan is home to elite fashion brands such as Bulgari, Gucci, Versace and Prada. Sports car manufacturers including Lamborghini and Ferrari also populate the industrial north.
Adding to the city’s appeal is the fact that prices for luxury goods and Michelin-starred food are rising slower in Milan than they are in London.
This is evidenced by recent figures from private bank Julius Baer, which found that jewellery prices rose 7.6pc in Milan last year versus 11.3pc in London.
That is without taking into account the policy of VAT-free shopping, which Britain has abandoned in recent years.
All of this is fuelling Milan’s bid to usurp London as the playground for the filthy rich, as Italian tax breaks are now as in demand as Gucci handbags.
Should Sir Keir gain power on Thursday, the expectation is that this shift will only gain more traction.
“The Labour tax proposals have accelerated people’s plans to move and they want to move quicker,” says Nimesh Shah, chief executive of accountancy firm Blick Rothenberg. “I’ve never been so popular with Italian advisers, they are knocking down my door.”
