It emerged late last week that Lehman Brothers, UBS Warburg, CSFB, and several other international financial institutions are currently being investigated by the Italian tax police.
The Bloomberg news service revealed on Thursday that the Guardia di Finanza may charge the firms as much as $30 million each for avoiding taxes on investment banking business undertaken in Italy but booked elsewhere, explaining that:
'Investment banks with headquarters in London send investment bankers to countries such as Italy to work on transactions when they arise. Italian authorities argue that business generated by such employees should be taxed there.'
However, most merger and acquisition fees are currently taxed in the UK, a tradition which is now being questioned by the Italian tax authorities.
The crackdown on tax avoidance comes as the government is trying desperately to strengthen revenue collection in order to reduce its $1.3 trillion debt. The possibility of a second amnesty on undeclared funds for individual taxpayers is also being considered, according to recent reports.
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