Italian Tax Amnesty Expires Today

by Ulrika Lomas, Tax-News.com, Brussels

15 May 2002

The tax amnesty declared by Italian Finance Minister Giulio Tremonti in November 2001, and later extended, expires today, and the Italian government says it expects that about Euros 40bn of exiled money will have returned to the fold during the amnesty.

The returning money comes in for a 2.5% tax, but banks have reassured returning customers that there is little possibility that they could be punished by a future Government for having placed the money overseas in the first place, as the tax on repatriated earnings is stripped out by the bank, and is therefore not linked to individuals.

At first, the Italian government hoped for a major exodus from banks in the city of Lugano in Ticino, traditionally the most popular tax haven for Italians. It is supposed that about Euros 400bn is held in Switzerland illicitly by Italians. So the government can only claim a modest success.

Italian banks have seized the opportunity to breathe new life into the country's feeble private banking sector, taking out full page advertisements, courting tax lawyers, and even offering to pay the 2.5% tax levied on repatriated funds in order to attract a section of this new market. But the banks' expectations of a flood of new money have been disappointed.

The Swiss banking industry seems to have been right in predicting that most Italians would choose to leave their money where it is. Said James Nason, spokesman for the Swiss Bankers Association: "We're convinced that people don't just bring their money to Switzerland to avoid paying tax. There are a lot of other attractions."

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