The Economist has a short article about the ongoing Italian offshore account amnesty. Look carefully for the penalty: Five. Percent.
ITALIANS are reckoned to have around €300 billion ($440 billion) of assets stashed abroad. The government would like to lure them back, or at least recoup some of the taxes it has lost out on. Tuesday December 15th was the deadline for bringing home or declaring assets secreted beyond the country’s borders under an initiative enacted in August known as the scudo fiscale, or “tax shield”.
The terms are attractive. Offenders remain anonymous throughout (hence the name). A penalty equal to 5% of assets wipes the slate clean of any tax offences committed before the end of 2008. UniCredit, a large Italian bank, describes the measure as extremely advantageous for residents who have been non-compliant.
Contrast that with the IRS and its “Sinners Must Burn In Hell” approach to penalties. “You will pay 20% and be grateful” seems to be the standard approach in the U.S.
It remains to be seen how successful the Italian amnesty turns out to be. I would expect — all else equal — that lower penalties mean greater enthusiasm amongst noncompliant taxpayers. Cheaper is better.
Of course, “all else equal” never exists. But at least in one key attribute the Italian tax authorities and the IRS are alike. Just like our friends at 1111 Constitution Avenue, the Italian tax boffins are demonizing the Swiss:
The Swiss are the main targets. Almost two-thirds of €78 billion brought to light by a previous scudo fiscale eight years ago were held in Switzerland. Even now, Italian financial assets in Ticino, an Italian-speaking Swiss canton, probably amount to €130 billion-170 billion. Italy has branded its neighbour an unco-operative tax haven and does not allow assets held in Switzerland to become compliant in the same way as those in other countries on the OECD’s “white list” of offshore tax centres.
“The scudo fiscale and the inequitable treatment of Switzerland have created a difficult climate,” complains Franco Citterio, director of the banking association in Ticino. Mr Citterio cites “excessive” frontier checks by Italian border guards and incursions by plain-clothes policemen into Switzerland to film customers in Lugano, the canton’s financial capital.
Some doubt whether Switzerland will really lose out. The government in Rome hopes that the scudo fiscale will raise about €4 billion in penalties, meaning that around €80 billion of assets will be declared. Less than a quarter of that amount will return home, forecasts Sergio Ermotti, UniCredit’s deputy chief executive. A senior banker in Lugano believes that the expertise of Swiss private banks means that many Italian clients will continue to entrust their wealth to them, either in Switzerland itself or in their onshore Italian branches.
Thanks, T, for sending the link.