The Italian economics minister has submitted a plan to give border communities in Italy lower taxes in order to dissuade people from working in Switzerland. As Swiss salaries are significantly higher than Italian wages, Giancarlo Giorgetti argued that businesses in border towns are struggling to sustain themselves.

Italy proposes border tax breaks to reduce cross-border working

At a symposium on cross-border working on Monday, Giorgetti announced that the Italian government is planning a “border tax premium” designed to give entrepreneurs and workers an incentive to continue operating in Italy, and prevent people from moving their businesses to Switzerland. Speaking to Ansa, he said that the measure was not meant to undercut the alpine nation and would simply allow residents "to choose whether they want to work in Italy or in Switzerland."

The new tax breaks would apply to communities within 20 kilometres of the Swiss border and would “benefit those companies and workers who choose to maintain production [in Italy] and thus create wealth on the peninsula," the minister said. The measure - which will most likely reduce tax rates for residents and businesses - would be implemented on January 1, 2024, the same time as a double taxation agreement is due to come into force between the two nations.

Italian border communities choosing to work in Switzerland

In justifying the move, Giorgetti argued that Italian border regions face “absolutely intolerable” competition from Canton Ticino and are in danger of “productive desertion” as more locals choose to take jobs in Switzerland. This is unsurprising, given that the average salary in Ticino is 2.900 francs more a month than in Lombardy, while Swiss taxes on said salary are more than 22 percent less than in Italy.

It is hoped that creating a low tax zone around Switzerland will stop the decline of bordering cities. It is likely that the Italian parliament will discuss and approve the plan when it ratifies the new cross-border and double taxation agreement which they have already concluded with the Swiss government.

Image: Shutterstock.com / Boris-B