Inside Italy: What it really means to be a 'high earner' in Italy

If your gross earnings are €36,000 a year in Italy, congratulations: you are - on paper at least - in the top fifth of the country’s high earners. If it’s €46,000 you might be surprised to find that you’ve broken into the top 10 percent.

While these are not bad salaries by any means, anyone making this kind of money probably wasn’t expecting to find themselves in the vicinity of the rich list.

The same top 10 percent starts at around £67,000 in the UK and $145,000 in the US. Which sounds a lot higher in comparison to Italy’s average declared income of around €24,800,

But the key word here is “declared”. The trouble with statistics based on tax returns in Italy is that, for them to be useful, they would have to be accurate. Italy’s official income figures are hollowed out by several factors, the biggest of which is tax evasion on a scale so massive it's hard to fathom.

Italy officially loses more than €100 billion a year in unpaid taxes and contributions, one of the highest rates in the EU every single year. And this is to say nothing of the many business owners and professionals who routinely take payment in cash and declare only part of their income. 

When I lived in southern Italy, cash-in-hand payment was so commonplace that I stopped noticing it, or requests for it. I quickly stopped judging too, once I understood how crippling the taxes are for small businesses. But for statistical purposes, a comfortable living financed mostly off the books shows up as someone living on the brink of poverty.

There’s also the flat-tax regime for self-employed people, which is all above board, but means some two million registered freelancers - many of whom actually work full time for companies who don’t want to deal with the Italian tax and social security burden - pay a different rate and don’t show up in these figures, either.

So with only full-time employees and pensioners in the official statistics, it’s probably fair to say they skew a little low. 

But then, so do Italian salaries. Average gross salaries run from around €34,000 in the north to €29,800 in the south and islands, three-quarters of employees earn under €35,000, and only one in ten clears €40,000. The thresholds that sort people into the top tiers sit barely above the average.

Another reason these “high earners” won’t be reaching for a copy of How To Spend It anytime soon is that, if they live in a northern Italian city especially, many will have nothing left over at the end of the month.

That €36,000 top-20-percent salary works out at somewhere around €1,800 a month in hand, which doesn't leave much for a single person to live on after paying rent.

Here in Florence, for example, the average rent on a modest 80-square-metre flat is cited by property websites as near €1,500 - rising to €2,000 in the historic centre, which is partly why hardly anyone can live there. These prices are in line with what I saw on my own recent property search. Prices are similarly horrifying in Rome and Milan.

There is one slightly more useful indicator that can tell us who is actually well off in Italy. The Bank of Italy reported this week that the richest 10 percent of households now hold 60 percent of the country's wealth, while the poorest half share just 7.2 percent between them. That wealth, overwhelmingly in property, is protected by one of Europe’s lightest inheritance tax systems - and has been for a long, long time.

Bank of Italy economists once compared Florentine tax records from 1427 with records from 2011 and found that the families who were rich in the fifteenth century are, by and large, still rich today - despite six centuries of plague, war, unification and Berlusconi.

In Italy, you can’t realistically hope to become well off by working hard to earn a decent salary or becoming a self-made success. Family wealth is overwhelmingly still what keeps people comfortable.

Of course, most foreign residents arrive here with a salary (if we’re lucky) and without the family home, the grandparents' place by the sea, or the many other smaller inheritances that help to cushion the Italian middle class against financial setbacks.

All of this is not to say that you can’t have a good (or great) standard of living in Italy, even on a modest income.

But, especially for people working internationally and living in cities, it’s important to know just how complicated it is to compare earnings here with other countries.

If you’re considering a salary offer from an Italian company, take the official comparison data with a pinch of salt. You’ll probably want to dig a little deeper into the local cost of living - and negotiate a little harder on the pay. Even if it does sound surprisingly good on paper.