An article about money laundering and organized crime in Italy contains this interesting paragraph about tax amnesty and hidden bank accounts:
Prime Minister Silvio Berlusconi’s government passed a law last year granting amnesty to tax evaders who agreed to repatriate savings stashed abroad. That led to about 100 billion euros being declared to authorities and more than 5 billion euros in tax revenue.
Of the 206,000 transactions related to the amnesty, 340, or 0.2 percent of the total, have so far been flagged as “suspicious,” said Castaldi.
So, in the face of serious organized crime, money laundering, and drug running programs the Italian government launches a tax amnesty that carries with it an effective cost of approximately 5% to the participants.
In the long run, the Italian system will be better off for having the 100 billion Euros clean and in the system.
I wonder what the net capital inflow will be for the United States as part of last year’s offshore account amnesty? I suspect that the success rate is somewhat lower, given the government’s “20% of high balance is your penalty and that’s a bargain, boy, so grab it while you can” attitude. Take $100 billion, divide by 15,000 participants in the Voluntary Disclosure Program. That’s an average balance of $666,667 per participant. This is a plausible result.
However, what would the results have been if the U.S. government had taken a cue from the Italian experience? My guess is that the amount of money repatriated to the United States would have been gargantuan and permanent.
Thanks to my correspondent T (a self-described “small fry”) for pointing me to the article.