Financial Regulatory Forum

Italian tax amnesty seen best yet, estimated at 100 billion euros

December 4, 2009

Italy's Economy Minister Giulio Tremonti attends a signing of government and commercial agreements between Italy and Turkmenistan at the Chigi Palace in Rome November 25, 2009. By Ian Simpson and Lisa Jucca

MILAN/ZURICH, Dec 4 (Reuters) – Italy’s tax amnesty is set to be the country’s most successful yet with a carrot-and-stick approach resulting in the return of more than 100 billion euros ($151 billion) stashed abroad, analysts estimated.

With a Dec. 15 deadline looming for repatriating assets, analysts and industry sources said funds sent back to Italy under the three-month programme would meet or beat Italian government and sector estimates.

Italy, carrying the third-biggest national debt in the world, launched the tax amnesty, its third in eight years, to boost government revenues during the worst economic downturn since World War Two.

Franco Citterio, head of the banking association in Ticino, the Italian-speaking Swiss canton bordering Italy, said three of 10 customers opted for the amnesty versus one in 10 in earlier ones.

“This tax amnesty has had more success than previous ones,” he told Reuters. “What made the difference was the heavy media campaign. Many clients got scared and chose to declare their offshore holdings.”

An estimated 400 billion Swiss francs ($400 billion) are held in Ticino, half of it belonging to Italians, he said.

“BIT OF TERROR”

Marco Mazzoni, president of the Magstat private banking consultancy in Bologna, said Italians were spurred to declare assets hidden abroad by a mix of easy terms for repatriation with well-publicised muscle against potential evaders.

Tax police carried out raids on 76 Swiss banks based in Italy, sparking a diplomatic row with Switzerland, and followed up this week with checks on four Austrian banks.

Tax agents also used cameras installed at the Swiss border to check vehicle license plates for Italians possibly carrying funds into Switzerland.

“The government has put a bit of terror into Italian savers with the raids on Swiss and Austrian banks. It’s been very effective,” Mazzoni said.

He estimated total inflows at 80 billion to 90 billion euros. At least 20 billion euros would go to Intesa Sanpaolo SpA, Italy’s biggest retail bank, he said. Italy’s number two bank UniCredit told Reuters in October it hopes to capture 10 percent of the funds.

Repatriation terms allow Italians to wipe the slate clean on undeclared funds abroad by paying a one-off tax of 5 percent of assets. The amnesty also covers accounting fraud.

Italians who have declared hidden funds by the deadline but cannot repatriate them because of issues beyond their control have until end 2010.

MORE THAN 100 BILLION EUROS

More than 100 billion euros of the roughly 600 billion euros Italians hold abroad could be repatriated, Italy’s Banca Leonardo estimated in a research report last month.

Economy Minister Giulio Tremonti, the amnesty’s architect, last week estimated windfall tax revenues at up to 4 billion euros, putting overall inflows at up to 80 billion euros.

That is the total amount repatriated under the the two previous amnesties in 2001 and 2003.

“The pace of filings … will definitely confirm the estimates made by Tremonti, estimates that are in line with ours,” said Bruno Zanaboni, secretary-general of the Italian Private Banking Association.

Mid-tier lender Banco Popolare has seen inflows of about 1 billion euros for private bank unit Banca Aletti, a Banco Popolare source said.

The Italian office of UBS AG, Switzerland’s

biggest bank by assets, declined to comment. However, a spokesman said: “We’re seeing positive signs of interest, clearly. There has been definite growth in the last few

days.”

Citterio, the head of the Ticino banks association, did not give estimates on the amounts transferred back to Italy.

He said a portion of funds was staying in Switzerland thanks to the so-called “rimpatrio giuridico”, or the virtual transfer of money to an Italian entity after declaration while keeping it de facto with a Swiss asset manager.

(Editing by Sitaraman Shankar)

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