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IMF Told Of Tax Reforms In San Marino

by Lorys Charalambous,, Cyprus

14 October 2014

The International Monetary and Financial Committee of the International Monetary Fund was on October 11, 2014, updated on progress towards tax-related reform in San Marino, including the introduction of a value-added tax (VAT).

Pier Carlo Padoan, Italy's Minister for the Economy and Finance, said: "The adjustment of public finances is ongoing. The main focus is on the entry into force of the reform of direct taxation – contributing to an increase in tax revenues – coupled with an expenditure review of the Public Administration and Public Entities, which is the result of an in-depth study conducted by a specific group of experts."

The public spending review had already led to a notable cut in total expenditure, allowing the halving of the 2013 budget deficit to EUR17.5m (USD22.2m). A further reduction to EUR15m is expected for 2014, Padaon said.

He reported that although a feasibility study had been completed on the introduction of a VAT to replace the current single-state tax, the draft law had been finalized. He said the subsequent legislative procedure will be started in the coming months following discussions with social partners. In addition to these structural measures, a law for attracting foreign investment has already been adopted.

With regards to cooperation with Italy, he said that San Marino is keen to further strengthen its economic and financial relationship with Italy, after Italy's decision to remove San Marino from its tax "black list."

In 2014, the process of consolidation of the banking and financial sector continued through capital increase operations, showing a substantial improvement in terms of liquidity and a moderate recovery in profit margins, Padaon said. "The accession of San Marino to SEPA (Single Euro Payments Area) on February 1, 2014, without benefiting from the postponement to July allowed by EU authorities, confirms the responsiveness of the institutions and of the banking system to meet the challenges of the European integration," he added.

"In this regard, the recent ratification by the Italian Parliament of the agreement on financial cooperation between Italy and San Marino is another fundamental element to open up the system in a framework of shared rules. The completion of this process is expected with the signing of a Memorandum of Understanding on banking and financial supervision between the two central banks. More generally, the adjustment of legislation and regulation in the banking and financial industry is continuing, in line with the provisions of the Monetary Agreement signed with the European Union in 2012 and subject to an annual joint review with the European Central Bank and the European Commission."

Padaon concluded: "San Marino is strongly committed to a process of internationalization and continues to adjust to international standards also in the field of exchange of information." The territory is to sign a FATCA intergovernmental agreement with the US by the end of this year; is also involved in the Group on the automatic exchange of information of the OECD Global Forum; and is taking part in the negotiations of the new European Directive on Savings Income, he said.

TAGS: Finance | Institutions | tax | investment | European Commission | value added tax (VAT) | FATCA | law | banking | budget | legislation | Italy | standards | regulation | San Marino | Europe | Economy

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