Italy Looking To Attract Foreign Taxpayers
In the UK, it is interesting that while the Government continues to dismantle the “non-dom” regime, under which wealthy foreign taxpayers (for the most part) don’t pay tax on their overseas earnings as long as those earnings stay offshore, Italy is creating its own non-dom regime, aimed at attracting the sort of entrepreneurial types that have been lured to London for decades, centuries even.
Indeed, a number of European countries that have struggled to compete with the UK on tax now appear to be falling over themselves to lay out the red carpet for London bankers and other highly remunerated professionals who contribute substantial sums in tax. France has been banging this particular drum for a number of months now, albeit without doing much about it, and the German state of Hesse – home to Frankfurt, continental Europe’s main finance center – has launched a tax helpline to assist any Brexit-disillusioned Brits thinking of making their way in Germany.
It used to be the case that the UK was seen as the predator. Fittingly, “laying out the red carpet” was ex-Prime Minister David Cameron’s phrase when inviting France’s entrepreneurs to escape President Hollande’s tax assault. Now it appears that the hunter is being hunted.
Significantly, the first taxpayer to be granted non-dom status in Italy originated from the UK. Will they be the first of many? Is this an early sign of an irrecoverable slide in competitiveness for the UK as a result of Brexit? Opinion is bound to be very much divided on that, but don’t be surprised to see more wolves circle the wagon in the months and years ahead.
On the other hand, perhaps the higher levels of complexity and larger tax burdens generally prevalent in Western Europe will deter many UK-based non-doms and HNWIs from taking the bait. Perhaps these jurisdictions need to make taxes lower and simpler to begin with, to maximize their appeal to investors. This is not a short-term option, of course. Such things are usually done a step at a time.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look