-- Marco Cerrato, a partner at Maisto e Associati, has seen his Italian tax-law firm field more phone calls than ever in recent weeks from London’s wealthy private equity fund managers nervously plotting an escape to Milan.The trigger for their growing anxiety is the prospect of paying a higher tax on their main source of compensation — the so-called carried interest, or the portion of investment returns shared between PE fund managers.
They also show how elections across Europe, political uncertainties and threats of higher taxation on the rich are diminishing the appeal of the continent’s finance hubs, including Paris and Frankfurt, which earlier benefited from Brexit. For its part, Milan has been burnishing its image over the years, having undergone somewhat of a renaissance. Several urban revitalization projects have helped transform dilapidated neighborhoods into contemporary landmarks. Home to new international schools, members-only social clubs and posh restaurants, it is also just hours away from attractions such as seaside towns, lakes and Alpine ski resorts.
The Labour Party’s PE proposal has only added to the jitters, Guelfi said, adding the calls about Milan are coming mostly from mid-sized firms that have more flexibility to move from London. “If these threats materialize, there is a risk of interrupting the flow of investments and relocations in France seen after Brexit,” said Carnevale. “If so, the second-best option is Milan.”
Labour says the higher tax on carried interest at PEs would help raise £565 million annually, to be spent on adding mental-health staff in the National Health Service, legal aid for disaster victims and the waiving of visa costs for non-UK veterans who served in the British military.
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