Italy's Government Proposes New Tax Amnesty

by Ulrika Lomas, Tax-News.com, Brussels

29 July 2009

The Italian government has proposed a new tax amnesty (or so-called “tax shield”) to encourage the repatriation of undeclared funds held by Italians abroad. It is hoped that this move will bring billions of euros back into the Italian economy.

The amnesty has been incorporated as an amendment to the “anti-crisis” fiscal package presently going through the parliamentary process. The amendment introduces an extraordinary tax on all assets held abroad and undeclared to the Italian authorities.

A 50% tax will be imposed on interest received from the regularised assets, which will be assumed at 2% annually over the past five years. This amounts to a total tax of 5% which will be payable on capital held abroad up to 31 December 2008 and repatriated or declared from 15 October this year to 15 April 2010.

The anonymity of the taxpayers is to be guaranteed, and the repatriation or declaration will not be able to be used in any way against them. However, the future penalty for non-declaration of foreign investments is to be doubled – it will vary from 10% – 15% (while previously it was from 5% – 25%. The sanction of confiscation has been abolished.

Because, according to the government, the amount of funds that will be repatriated cannot be reliably forecast within the 2009 and 2010 budgets, the expected tax has been taken within the amendment at only one euro. However, it has been estimated that the expected tax benefit should be up to EUR3.5bn. In addition, bringing hidden funds back into the Italian economy could provide a welcome injection against the current recession.

At a press conference, Giulio Tremonti, the Italian Minister for the Economy, said that the government’s objective was to put an end to tax havens, rather than merely to combat tax evasion.

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