Italy Expects Tax Influx From Swiss Agreement
The signing of a double taxation agreement (DTA) protocol between Switzerland and Italy, which includes a provision for the exchange of information upon request, has fueled an expectation that the Italian Treasury will be able to collect substantial additional tax revenue this year.
While it could take up to two years for the protocol to be ratified by both countries, the signing of the agreement will mean that Switzerland can now be removed from the “black list” of countries that do not have an adequate tax information exchange arrangement in place with Italy.
In turn, that will mean that Italians with undeclared assets in Switzerland will be allowed to enter into Italy’s current voluntary disclosure program, which allows Italian residents to regularize undeclared capital held abroad.
An application for inclusion in the program needs to be made by September 30, 2015. Participants have to pay all outstanding taxes. However, the taxpayer will be subject to much-reduced administrative and criminal penalties and will generally be free from criminal prosecution.
The Italian Government is hoping to establish a “pincer” movement, whereby it can flush out Italians with undeclared assets in Switzerland but also offer them the opportunity of utilizing the voluntary disclosure program.
Italian Premier Matteo Renzi has already strongly welcomed the new agreement with Switzerland and emphasized that “now would be a good time for the return of large amounts of funds to Italy, because of the approval of the voluntary disclosure program, together with recent exchange rate movements.” After the signing of the DTA protocol, he tweeted that he looked forward to the “billions of euro that will return to the state.”
However, while Vieri Ceriani, Secretary for Fiscal Affairs within the Italian Finance Ministry, described it as “an anti-tax evasion instrument agreement that would have been unthinkable several years ago,” Italy’s Minister of the Economy and Finance Pier Carlo Padoan was more sanguine. “This agreement has cost us only one euro,” he stressed. “I can say with certainty that it will mean additional tax revenue more than one euro, but beyond that I cannot go.”
However, providing that Italian investors in Switzerland do not merely move their funds elsewhere, it is expected that an effective tax treaty could be of real importance to Italy in providing revenue that could be used to cut the burden on the country’s current taxpayers.
While the actual figures are obviously unknown, it has been assumed the total stock of undeclared Italian assets abroad amounts to around EUR150bn (USD170bn), of which more than three-quarters could be held in Switzerland. Therefore, it would not be difficult, it has been said, for the Italian Treasury to collect at least EUR5bn more in tax revenues this year.
