Italy considers amnesty extension

Italy’s government is considering the extension of a tax amnesty that expired on 15 December.

The amnesty on funds held by Italians in offshore accounts is the third since 2001 and is expected to raise up to 80 billion euros.

The amnesty was launched earlier this year by Italian Minister of Economy and Finance Gulio Tremonti. It allowed Italians to repatriate funds held in accounts abroad by paying a low five per cent tax, rather than face potential criminal prosecution for tax evasion.

Although official figures are not yet available Mr. Tremonti estimated in November that the treasury would receive an additional 4 billion euros in taxes.

The tax amnesty comes at the cost of Italy’s low tax neighbours Switzerland and San Marino. Switzerland is estimated to hold nearly half of all Italian money deposited in offshore accounts, followed by Luxembourg believed to be holding nearly a third.

San Marino already lost 2.4 billion euros in bank deposits since the amnesty was launched, finance minister Gulio Gatti said, making the economic recovery for the small enclave in the northeast of Italy more difficult.

When news of the tax amnesty broke, rating agency Fitch Ratings downgraded San Marino’s long-term credit rating from AA- to A, stating that the amnesty threatened the country’s business model.

Switzerland’s cantons bordering Italy are likely to lose significantly more funds from ‘scudo III’, as the amnesty was dubbed, if previous tax amnesties serve as an indicator.

In earlier amnesties 25 billion euros were repatriated from Swiss banks to Italy and a further 19 billion were identified, but remained in Switzerland under the regulatory authority of the Italian tax office.

According to Italian media, the government plans to extend the amnesty at a slightly higher 6 per cent tax rate until April 2010.