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Premier Giorgia Meloni hopes measure will also ease EU concerns over the country’s yawning fiscal deficit

Italy has doubled a flat tax on the foreign income of new residents, in a blow to rich expats seeking to flee the prospect of higher levies elsewhere in Europe. 

Prime Minister Giorgia Meloni’s cabinet on Wednesday approved a rise in the annual flat tax on overseas income for new tax residents in Italy to €200,000.

The current €100,000 tax incentive, while popular with wealthy individuals, has been controversial among Italians, especially in the business capital Milan, where the recent influx of the super-rich has been blamed for a sharp increase in real estate prices and other rises in living costs.

The government hopes the move will also help increase tax revenues and bridge a yawning budget deficit, mollifying concerns in Brussels over Italy’s state finances.

The decision comes as Rome is struggling to tackle a budget deficit, which reached 7.4 per cent of gross domestic product last year — well above the 3 per cent of GDP targets for EU member states. 

The EU has forecast Italy’s budget deficit for 2024 will be 4.4 per cent of GDP, still well above the target, which in July prompted Brussels to start excessive procedures that require Rome to submit a medium-term fiscal adjustment plan by late September. 

Finance minister Giancarlo Giorgetti, who on Wednesday referred to the levy as the “so-called flat tax for the billionaires”, did not immediately say how much extra revenue the new rate is expected to raise.

However, Giorgetti said the increased levy was still at a level that would remain “interesting” to high-net worth individuals. He later clarified to the Financial Times that the higher levy would only apply to people taking up tax residency in Italy from now on, and not those that had already moved there.

Rome also wanted to avoid a race to the bottom with other nations in trying to lure individuals and companies through tax breaks. “If this competition starts, countries like Italy — which has very limited fiscal space — are inevitably destined to lose,” the finance minister said on Wednesday.

In the past few years, Italy — typically considered a high-tax jurisdiction — has emerged as a popular new residential destination for the world’s nimble-footed super-rich, thanks to the generous tax incentives started in 2016 in an effort to reverse the country’s long-term brain drain.

The scheme, launched after the Brexit vote prompted many British-based Europeans to return home, allowed new foreign tax residents to Italy, or Italians returning from at least nine years living abroad, to pay a flat tax of just €100,000 on any foreign income or assets for 15 years.

So far, the scheme, known locally as “the footballers’ scheme”, has been credited with attracting at least 2,730 multimillionaires, such as private equity executives, oligarchs and entrepreneurs, to take up residence in Italy, mainly in Milan.

The tax breaks were resented by many Italians, especially in Milan, where the influx of the wealthy has been blamed for a 43 per cent increase in real estate prices over the past five years, and near 20 per cent rise in rentals in the two years to March.  

Still, many investors had expected the inflow of big spenders would continue as Britain’s new Labour government prepares to abolish the UK’s controversial “non-dom” regime, which had allowed wealthy foreigners to avoid paying any tax on their overseas income. 

Three Hills Capital Partners, a London-based private equity firm, said last month it was preparing to launch a private members’ club in Milan in the autumn, the latest in a series of upmarket venues to open in the city in the past several years.

Dismayed foreigners warned that the sudden flat tax change, and the lack of long-term fiscal stability it implied, was ominous for people considering a move there.

One French investor, who is in the process of moving from London to Milan to take advantage of the scheme, said that while he is not rethinking his plans at the moment, “it makes it more expensive” and the direction of travel is worrying.

He added: “It sends a signal that it’s not a stable regime, which I think is terrible.” Nodding to the increasing rate of flat tax, he said: “You have to wonder, €100k, then €200k, then €400k?”

Investigation examines whether JPMorgan Chase, Bank of America, Wells Fargo and others do enough to shut down accounts controlled by bad actors

Regulators are investigating some of the biggest U.S. banks for their handling of customer funds on the peer-to-peer payments platform Zelle, which has been facing scrutiny over scams and fraudulent transactions.

The Consumer Financial Protection Bureau probe focuses on JPMorgan JPM 2.79%increase; green up pointing triangle Chase, Bank of America BAC 0.74%increase; green up pointing triangle and Wells Fargo WFC 0.46%increase; green up pointing triangle, among other large banks, according to people familiar with the matter.

It is broad in nature and meant to examine how the banks respond when customers dispute transactions made through Zelle, the people said. JPMorgan disclosed in a filing Friday that it was responding to CFPB inquiries regarding Zelle; other large banks are expected to disclose contact with the CFPB soon.

Zelle, created in 2017 to compete with popular money-transfer services such as Venmo and Cash App, is owned by a consortium of seven of the largest U.S. banks including JPMorgan, Wells Fargo and Bank of America. The network now handles a larger dollar value of transactions than Venmo. But with the rapid growth came an increase in complaints that the banks weren’t doing enough to help retrieve money their customers were duped into sending.

Banks are required to refund customers for transactions they didn’t authorize, but there isn’t legal protection for customers who send the money themselves. Reversing erroneous transfers is usually impossible.

Part of the CFPB’s probe focuses on whether banks are proactive enough in shutting down accounts controlled by scammers, the people familiar with the matter said. The CFPB is also examining the degree to which banks vet the identity and background of deposit-account customers who end up being bad actors.

Banks have said the majority of payments made through Zelle are legitimate and don’t believe they could reasonably prevent all misconduct that happens through the service. Steps they have taken in recent years to protect customers include repeated warnings about sending money to strangers.

Since last summer, Zelle has required its member banks to reimburse customers for certain disputed transactions even when the victim authorized the payment, such as when scammers impersonate a government official or a customer’s bank.

JPMorgan in its Friday filing said the CFPB is preparing to either reach a settlement with the bank over its inquiries or bring legal action, and that the bank is prepared to go to court over the matter.

A JPMorgan spokesman said that the CFPB “is fully aware we already go above and beyond what the law requires” and that the regulator “should expect to be challenged to ensure their actions stay within the bounds of the law.”

Wells Fargo has previously disclosed inquiries regarding Zelle from “government authorities.”

Early Warning, the network operator of Zelle, said in a statement that 99.95% of transactions are completed without reports of fraud or scams, thanks to the countermeasures it has in place.

Separately, some lawmakers have questioned whether Zelle’s owners are fulfilling their legal obligation to reimburse unauthorized fraudulent payments, such as when a customer’s phone is stolen and a payment is made without the customer’s involvement.

Sen. Richard Blumenthal (D., Conn.) said in a report last month that JPMorgan, Wells Fargo and Bank of America reimbursed about 38% of customers reporting unauthorized transactions in 2023, down from 62% in 2019. Blumenthal, in a letter to CFPB Director Rohit Chopra on Monday, urged the bureau to investigate and suggested the decline was because banks aren’t following the law.

Banks have said many of these complaints turn out to involve authorized payments and aren’t legally required to be reimbursed.

Purchase of apartments is the largest by a public REIT in seven years

Apartment giant Equity Residential said it has agreed to purchase 11 apartment complexes with more than 3,500 units for $964 million, the latest big investor bet that rents and values are poised for a rebound.

Its acquisition of the garden apartments and other types of rental units in the Atlanta, Denver and Dallas/Fort Worth regions marks the biggest U.S. multifamily purchase by any public real estate investment trust in the past seven years.

The seller is the investment firm Blackstone, which otherwise has been a big buyer of apartments this year. In June, Blackstone completed its purchase of Apartment Income REIT, an owner of upscale apartment buildings, for about $10 billion. It is selling these properties to Equity Residential in part to return cash to investors.

“Rental housing remains one of our highest-conviction themes, and we continue to see strong fundamentals in attractive markets,” said Asim Hamid, senior managing director at Blackstone Real Estate.

Equity Residential is one of the largest owners of U.S. apartments with about 80,000 units in close to 300 properties.

The firm was attracted to the portfolio because the complexes are in high growth markets, said Alec Brackenridge, the company’s chief investment officer. He said the price of the units, which on average are eight years old, was attractive compared with what it would cost to replace them.

Like with most other commercial real estate, rental apartment values have been hurt by high interest rates. Many apartment owners also have been unable to raise rents during the biggest construction boom for the multifamily sector in about 40 years.

But there have been a flurry of big deals in the multifamily sector this year, indicating that more investors are anticipating a rebound. This view has been strengthened by the growing likelihood that the Federal Reserve will cut interest rates in September.

Investors are also becoming more bullish on the multifamily sector because the glut of new supply is being absorbed in some markets as development cools. In some cities in the Northeast and Midwest, rents are rising again.

“In the longer term we see relief on the way that [construction] starts in these oversupplied markets have collapsed and deliveries in 2026 and 2027 are likely to be much lower than both current levels and historical levels,” said Mark Parrell, Equity Residential’s chief executive, in an earnings call last month.

Other deals this year include KKR’s purchase in June of more than 5,200 units for $2.1 billion from Quarterra, the apartment development arm of home builder Lennar. Brookfield recently bought a portfolio of 7,000 apartments for $1.55 billion.

The properties that Blackstone is selling to Equity Residential in separate transactions are being held by three of the firm’s funds: Blackstone Real Estate Income Trust, Blackstone Real Estate Partners and Blackstone Property Partners. Closings are expected to take place in the third quarter.