Taxes are a problem but the work culture is also an issue. I tried to setup shop in Italy last year and it was... a mess. People not joining calls, broken English, a very concerning lack of trust in general from job candidates. I was offering market or higher than market wages. I ended up hiring more in our base in Krakow. It's getting harder to find people in Krakow but the work culture is on another level and English good across the board. Net IT salaries in Poland are more or less comparable to Italian ones, the overall cost difference is max ~20% for senior roles, so yeah taxes, but not enough to explain the "hold back" honestly.
The work ethic in Italy is … interesting. In my experience, they get their shit done when they say it will be done, not when you say it should be done. They enjoy time with family, and time away from work (when I say enjoy, I mean they will make time for it, even in the middle of an American defined work day). I’ve never had an issue with the Italians I’ve worked with and I’ve truly enjoyed spending time with them.
I think one issue is that market wages (or reasonably higher than market ones) for developers are so low that good talent will simply not be interested in your offer, especially if you are a small company (in which case you can at least play the "job security" card, which I think has a lot of weight here).
Setting up shop or working as a freelancer just pays so much better.
