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Following recent indications by both governments that the tax treaty currently being negotiated between Italy and Switzerland could be ready by the end of this year, the Italian Premier Mario Monti and the Undersecretary for the Economy Vieri Ceriani have underlined that the talks still have some way to go.
Earlier this month, Italian Minister of the Economy Vittorio Grilli had confirmed that Italy is working towards a tax treaty with Switzerland, possibly by the end of this year, while the Head of the Markets Division of the State Secretariat for International Financial Matters in Berne, Oscar Knapp, had even put a date on it, indicating that its signature could take place by December 21.
Discussions on a treaty have already taken longer than expected, having begun in May this year, after the establishment of a bilateral working group. The two sides are talking about an agreement on the regularization of assets already held in Switzerland by non-resident taxpayers, through the payment of a fixed tax rate, and the introduction of a withholding tax on future investment income and capital gains.
While the draft text of the agreement covering the regularization of undeclared Italian assets held with Swiss banks is believed to mirror the agreements that Switzerland has reached with other European Union countries, and the recent rejection of Germany’s Swiss agreement by the Bundesrat appears to have had little overall effect on the Italian government’s intentions, it is believed that the two countries still disagree on a number of matters.
It appears, for example, that the initial amount that the Swiss banks should pay to the Italian Revenue Agency and the number of past years over which it should be calculated, and the tax rate over future income from Italians’ Swiss deposits, which the Italian government requires to be at or near to domestic Italian tax rates, remain to be decided.
It had previously been suggested that the additional tax revenue that would be available to Italy if it were to agree a deal, on estimated undeclared Italian funds in Switzerland of up to EUR160bn (USD207bn), could amount to some EUR40bn up-front, with other significant funds paid annually thereafter.
However, apart from the tax revenues that Italy may, or may not, glean from an agreement with Switzerland, the Italian government is also concerned that, as Monti confirmed recently, there should be no suggestion that the terms of an eventual treaty could be considered to be a form of tax amnesty.
In particular, Ceriani added, any suggestion that Italian depositors in Switzerland should remain anonymous could be a sticking point, as Switzerland has agreed in previous OECD talks to the full exchange of tax information, which would also need to be included in the (previously agreed but uncompleted) double taxation agreement between the two countries so that Switzerland can be taken off the Italian "black list."
Given all of the above, Ceriani made the comment that negotiations on the tax treaty with Switzerland could not be considered to be in their final stage, and that all of its terms are still under discussion.
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