Brain drain, inpatriates and taxes. What is going on
The legislative decree on the ipatriate regime does not please the "brain drain", high-income professionals who now see their tax discounts reduced. Facts, numbers and insights
Even brain drains have to pay taxes. This is the message that came from the proposal to modify the so-called " impatriate regime ", i.e. the tax regime that encourages "brain drain" to return to Italy, approved together with the Budget law in the Council of Ministers last Monday.
THE LEGISLATIVE DECREE ON THE IMPATRIATES REGIME
The legislative decree establishes that managers, professionals and workers with a high level of training who decide to return to Italy from 2024 "will be able to benefit from a 50 percent tax reduction, within a subsidized income limit of 600,000 euros". This limit was not previously in place and a reduction has been introduced: the old system allowed the income produced in Italy to contribute to the formation of the overall income only at 30 percent of its amount. This figure reached 10 percent if the "brain drain" chose to return not only to Italy but to a southern region.
TAX DISCOUNTS FOR BRAIN DRAIN
The tax discounts were introduced in 2004 and were reserved for researchers and university professors . Subsequently, in 2015 and then in 2019, the range of potential beneficiaries was broadened and the tax discount was extended. The Conte II government introduced particular benefits for workers who have spent at least two years abroad but decide to leave their tax residence in Italy for at least another two years. For them the reduction in the taxable amount is 70%, and professors and researchers enjoy an even greater benefit: the taxable amount is reduced by 90%. Therefore, taxes are paid only on the remaining part. In essence, considering the no tax area, up to around one hundred thousand euros no taxes are paid.
WHAT THE NEW MEASURE INCLUDES
According to the new provision, the discount will be 50 percent, and there will be no concessions for the southern regions. The measure will be applicable to workers in possession of the "high qualification or specialization" requirements who do not appear to have already been resident in our country. in the three tax periods prior to obtaining residence". And just two years of tax residence in Italy will no longer be enough, five will be needed, otherwise the workers will have to repay the benefits, paying interest.
RENZI: “WE LAUNCHED A PETITION”
“Giorgia Meloni has decided to block the return of Italian brain drains abroad and this is unacceptable, absurd”. Former prime minister Matteo Renzi and leader of Italia Viva spoke like this. “Today in the newspapers we read that there is a desire to change the rules that we had made and which were incentives to bring professionals, girls and boys back to Italy because, it is not clear, they want to change the duration of the incentives – Renzi continues -. I ask you to sign the petition we have launched as Italia viva".
THE PETITION ON CHANGE.ORG
But not only former Prime Minister Renzi has launched a petition. On Change.org various organizations of professionals and graduates who have returned or plan to return to Italy, from Controesodo to chEuropa to Gruppo Rientro Italia. The latter presented an open letter in which he asks the Prime Minister, the Minister of Economy and Finance, the Ministers and Deputy Ministers, Undersecretaries, and Parliamentarians not to proceed with the proposed amendment to the "Impatriates' Regime", as approved " on a preliminary basis by the Council of Ministers of 16 October 2023 and which will be subjected to scrutiny by the competent parliamentary commissions in the coming weeks".
DOUBTS OF THE SHEET: UNFAIR MEASURE TOWARDS ITALIAN PROFESSORS AND TOWARDS THE POOREST
As Carlo Stagnaro and Luciano Capone wrote in Il Foglio , the measure was not free from iniquity. On the one hand, "a study by economists Jacopo Bassetto and Giuseppe Ippedico found that the number of returns has actually increased and that the greater revenue is roughly enough to counterbalance the discounts granted to those who would have moved to Italy regardless of the incentives". On the other hand, however, it remains difficult "to justify a tax regime that treats two workers who carry out the same tasks, who have followed the same training path, who have the same skills, who perhaps work side by side and that differ only because one has spent time abroad.” In addition to horizontal inequity, as Il Foglio writes, there is also a vertical one. The 19,400 workers benefiting from the relief “have an average gross income of 131,920 euros, approximately six times the national average; therefore, incentives for the return of brains have a highly regressive effect." So, they make those with high incomes pay less taxes at a much lower rate than those who are poorer.” And this characteristic was even more evident when the benefit was reserved only for graduates.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/cervelli-in-fuga-impatriati-e-tasse-cosa-sta-succedendo/ on Sun, 22 Oct 2023 08:23:05 +0000.