Christian Science Monitor; By Anna Momigliano - Correspondent ; October 20, 2009

MILAN, ITALY - When 50,000 Italians received a letter from the tax office last week, they breathed a sigh of relief. They weren’t being billed. Instead, they were 
 given a gentle reminder that they had until Dec. 15 to declare any money illegally held abroad - or else.

 The Italian government is desperate to attract capital home in a time of economic crisis, not least to boost tax revenue. The Scudo Fiscale (‘fiscal shield’) 
 program allows citizens to bring money from offshore tax havens while remaining anonymous and avoiding sanctions for past tax evasion. All they have to do is 
 move their money to an Italian account within the next two months and pay a 5 percent fee.

 But critics say the plan is the latest in a long line of amnesties that have created a culture of tax evasion for wealthy Italians.

 ‘The idea, in theory, is to give people a last chance. It should be an emergency measure", says Paolo Guerrieri, who teaches international economics at La  Sapienza University in Rome. "But in practice this is an incitement to tax evasion. Here in Italy these kinds of ‘emergency measures’ are so frequent that people know they can just wait for the next amnesty",  says Mr. Guerrieri. "It’s an insult to honest citizens".

 But those who do hold illegal foreign accounts may have an extra incentive to take advantage of the amnesty this time around, with Switzerland recently relaxing 
 its banking secrecy rules, which increases the odds that Italian tax cheats will be caught. During the G20 summit in March, Swiss authorities agreed to cooperate 
 more with other nations in tracking down tax evasion. The move came following pressure from the US and European countries worried about the impact of tax 
 evasion on their economies.

 Following this change in Swiss policy other European countries are also approving measures to bring capital back home. ‘Britain and France, for instance, are 
 offering penalty discounts for those who transfer into local accounts money illegally held abroad,’ says Guerrieri. ‘But they don’t grant anonymity, nor do they 
 condone past tax evasion".

 Most European nations need extra cash now, Geurrrieri says, but Italy’s situation is unique: "You can’t compare offering penalty discounts with condoning 
 crimes",  he says. "We’re openly surrendering the possibility to build a sound fiscal system [in exchange] for an immediate profit. And eventually we’ll pay the 
 price. No wonder Italy has one highest tax evasion rates in the continent", he says.

 Italian capital held illegally abroad is estimated at about 300 billion euros ($450 billion), according to government figures. At least a third of that money is thought 
 to be in Swiss banks. Reportedly, 29 000 Italian citizens are formally residents of the so-called "fiscal paradises" like San Marino (a small independent city-State in central Italy) and Monaco.

 Authorities say they they expect 100 billion euros ($150 billion) abroad to re-enter Italy with this special measure, which would mean an extra 5 billion euros ($7.5  billion) of tax income for the state.

 The conservative government vowed to use this money to build infrastructure, including a mega-bridge that would connect Sicily to the mainland, to renovate the 
 country’s two major airports and to partially reduce public debt.

 ?Many talk about all the things we can build with the fiscal shield", says Guerrieri, the economist. "But I also wonder about the infrastructure we will not be able 
 build in the future because of the rampant tax evasion".
 

http://features.csmonitor.com/globalnews/2009/10/20/
italian-tax-amnesty-could-bring-150-billion-home-but-at-what-price/
 

The ANNOTICO Reports Can be Viewed (With Archives) on:
[Formerly Italy at St Louis]