Bank Of Italy Against Tax Amnesty, While Swiss Protest

by Ulrika Lomas, Tax-News.com, Brussels

21 October 2009

The Bank of Italy’s recent comments on the possible adverse effects of Italy’s present tax amnesty have been denied by the government, while displeasure about its terms has been expressed by Switzerland.

Roberto Saccomanni, General Manager of the Bank of Italy, has made similar comments on the Italian tax amnesty to those expressed previously this month by analysts from the rating agencies, Standard & Poor’s and Fitch. In his opinion, one of the effects of the amnesty could be that the incidence of Italian tax avoidance would increase in the future, as it is more profitable for taxpayers to await the next amnesty rather than declare now and pay taxes.

The Bank, he said, was nervous about the difficulties this could cause to the necessary stabilization and reduction in Italy’s public sector deficit over the next three years. He did, however, recognize that the return of funds to the economy could have positive effects if at least a part were invested, as is encouraged in the terms of the amnesty, in the recapitalization of productive businesses.

In turn, Italy’s Minister of the Economy, Giulio Tremonti, said that there was no cause for concern over the possible effects of the amnesty, and that, if there were, it would be a concern to all those countries that had put in place a similar policy. He has already professed that this amnesty would be the last and that it represented the final opportunity to bring back all of the funds deposited abroad, particularly from Switzerland. He stated that international action against 'tax havens' would still persist after the conclusion of the amnesty.

Meanwhile, in Switzerland, the Association of Ticinese Banks and politicians from the Canton of Ticino and the Bellinzona and Lugano municipalities - the Swiss regions likely to be most adversely affected by Italy's tax amnesty in terms of lost assets and employment – have protested against the terms of the amnesty. They are particularly concerned that undeclared funds from Switzerland can only be repatriated, rather than having the alternative choice of regularization (that is, a declaration of the existence of the assets and payment of the penalty, but their retention abroad).

The complainants highlight the fact that Switzerland and San Marino have been taken off the OECD “gray list" as countries that have substantially implemented the internationally agreed standard for the exchange of tax information, but the only option under the tax amnesty for those with undeclared funds in those countries remains to repatriate the assets into Italy. According to the tax amnesty regulations, undeclared assets held abroad can only be regularized if the jurisdiction in which they are held has an existing agreement for the exchange of tax information with Italy itself.

While the final version of the tax amnesty regulations allows for the management of funds that are repatriated into Italy through an Italian financial intermediary to remain abroad (for example, in Switzerland), this has not lessened the protests from Switzerland, presumably due to the reduced commission that would then be earned.

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