Italy appears poised to become a tax haven. Although the country isn’t traditionally known for administrative simplicity, its government has found one service it can deliver with efficiency: reassuring millionaires.
Wealthy residents of France and other European countries are increasingly moving to the Italian Republic. The rich may be moving for lower taxes, but that isn’t the whole story. Italy’s tax system for wealthy newcomers allows them to pay a fixed annual amount on foreign income, with a cap.
This means the Italian taxman stops counting past a certain level of wealth. For anyone used to shifting winds of French wealth politics, British non-dom uncertainty, or Dubai’s increasingly complicated geopolitical risk profile, some degree of certitude has obvious appeal.
Italy is offering the global rich both a discount and a number they can build a life around. French expats in Italy, for instance, likely are planning for 2027, when the next French presidential election could produce a government more eager to tax capital, property, and inheritances. That possibility changes behavior even before the law itself changes.
A high tax rate may be frustrating, but an unstable policy framework is intolerable. Italy’s most valuable offer to Europe’s rich may be some degree of certainty that they’ll be taxed under a rule that will still be on the books next year.
If there is a lesson for other countries—including the US—it’s not that legislators should start selling bespoke tax packages for foreign millionaires. It’s that stability matters and instability carries a cost.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed how AI is taking over audit functions, the impact of medical cannabis’s rescheduling, and more.
The Exchange—It’s where great ideas on tax and accounting intersect.
Insights
Corporates Can Find Ways to Maneuver Around Global Minimum Tax
Companies are complying, but also adapting, restructuring, and in some cases sidestepping the spirit of the OECD’s global minimum tax writes Unite’s Karen Nally.
AI Is Taking Over Audit Functions. Accounting Needs to Get Ready
Patrick Morgan’s James O’Dowd says KPMG’s rollout of advanced artificial intelligence agents is the start of something structurally significant: a “K-shaped” reshaping of professional services, in which the top accelerates, the bottom collapses, and the distance between them becomes the competitive question.
Accounting Firms With Private Equity Funds Need Focus to Succeed
Private equity investment can accelerate an accounting firm’s growth, but it can’t replace focus, alignment, or execution, Lotis Blue Consulting’s Mark Masson says.
Cannabis Rescheduling’s Compliance Costs Will Dent Tax Savings
For medical cannabis businesses, Drug Enforcement Administration compliance costs will partially offset the tax savings to result from the Justice Department’s rescheduling order, Abraham Finberg and Simon Menkes say.
Tax-Free Debt Exchanges Are Crucial Part of Transactions Toolbox
The frequency of tax-free debt exchanges has risen alongside spin-off and split-off transactions, but the IRS’s unclear position on such exchanges warrants taxpayer caution, Simpson Thacher’s Drew Purcell and Alec Jarvis say.
Tax Certainty Efforts Will Pay Off for Businesses, Governments
Tax predictability is win-win, as it helps multinationals stay compliant and decide how to structure new business operations, and reduces time-consuming audits and tax litigation for country governments, writes Jefferson VanderWolk of Squire Patton Boggs.
Hyatt Tax Case Sets the Stage to Change Loyalty Reward Programs
A federal appeals court sent a case involving Hyatt Hotels’ customer rewards program back to the US Tax Court, and the final ruling could transform how these programs are structured, say Miller Canfield’s Loren Opper and Christie Galinski.
Five Questions With Katten Tax Planning Partner Saul Rudo
Bloomberg Tax Insights & Commentary is featuring a recurring questionnaire of prominent tax professionals who are willing to share their thoughts about their work and the practice of tax these days. Today we feature Saul E. Rudo, chair of Katten’s transactional tax planning practice in Chicago.
Technically Speaking
The IRS must resolve President Donald Trump’s tax data leak case in a way that would apply to materially identical claims, Andrew Leahey says in his latest Technically Speaking column.
If the agency doesn’t commit to consistent treatment—or at least explain disparate outcomes—it “will risk creating a de facto two-tier system,” Andrew writes. This would hurt voluntary tax compliance, costing the IRS more in the long term than any settlement with the Trump family, he argues. Read More
News Roundup
Wyden Presses IRS to Probe Puerto Rican Legal Tax Advice
The top Senate Finance Committee Democrat is calling on the IRS to investigate tax planning advice provided by two of the largest global law firms the lawmakers say permitted high-net-worth clients to evade more than $100 million in federal taxes by claiming Puerto Rican residency.
Meta Gets $8 Billion Boost From Treasury Move on R&D, Book Tax
Meta Platforms Inc. recorded an $8 billion tax benefit to its first-quarter earnings Wednesday, boosted by a Treasury Department change in how research and development costs are treated under the corporate book-income tax.
House Passes Bipartisan Bills Tackling Tax Administration
House lawmakers Monday passed by voice vote measures that tackle tax administration issues such as speeding up paper returns processing, boosting online access to IRS and taxpayer data, and giving taxpayers third-party data protections.
KPMG Cuts 400 Consulting Jobs, Phases Out Federal Auditing
KPMG’s US arm announced Wednesday its second round of job cuts in a week, along with plans to phase out audit work for federal agencies.
Tax Management International Journal
Middle Market Companies Need Strong Transfer Pricing Policies
A proper transfer pricing policy can have big operational benefits for a company’s functions—such as cash management, supporting net operating losses, and a company’s capital structure, Cherry Bekaert’s Nelson Yates says.
Why Royalty Disputes Are Rising in Global Taxation: PepsiCo Case
International tax scrutiny is intensifying, with disputes increasingly focused on intangibles, cross-border structures, and the correct characterization of royalties, says Baker McKenzie’s Antonio Weffer.
Transfer Pricing, Treaty Benefits Reshaped by OECD’s Tax Update
The OECD has handed tax authorities a robust, treaty-sanctioned framework to attack excessive debt financing, meaning corporate tax directors must ensure every intercompany financial transaction is backed by rigorous analyses, says STI Taxand’s Christos Theophilou.
Tax Management Memorandum
Don’t Trust AI, Always Verify. Tax Law Still Needs Humans—Pt. 1
While AI can assist with tax drafting and research, it is fundamentally unreliable for tax law because it can invent authority, flatten legal hierarchy, and miss doctrine that depends on purpose, substance, and context, states a Texas A&M visiting adjunct faculty member.
Don’t Trust AI, Always Verify. Tax Law Still Needs Humans—Pt. 2
Tax professionals must move from passive reliance to active verification. “Human-in-the-loop” verification will preserve the integrity of the tax system, says a visiting adjunct faculty member at Texas A&M University.
Career Moves
Former IRS Criminal Unit Chief Guy Ficco to Join Kostelanetz
Guy Ficco, the ex-chief of the IRS crime unit, is joining Kostelanetz LLP as a senior investigator, the firm announced Friday.
Russell-Cooke Hires Matthew Radcliffe as Private Client Partner
Matthew Radcliffe joined Russell-Cooke as a partner in its private client team in London, the firm announced Monday.
Miller Thomson Adds Perry Kiefer as Corporate Tax Partner
Perry Kiefer joined Miller Thomson as a partner in its corporate tax group in Saskatoon, Saskatchewan, Canada, the firm announced Monday.
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