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Will tax amnesties halt evasion?


Swiss banks may again feel the pressure of large cash withdrawals in a short space of time as Italy and Britain plan another round of tax amnesties.

Critics argue that amnesties fuel rather than restrain tax evasion because they allow offenders to get off the hook. But some observers believe a combined crackdown on banking secrecy and amnesties could this time hurt havens.

Italy wants to stage its third tax amnesty in nine years, hoping to raise some €5 billion (SFr7.6 billion) in revenues and repatriate tens of billions of euros illegally stashed abroad. Amnesties in 2001 and 2003 raised an estimated €2.1 billion for the national coffers.

Italian Finance Minister Giulio Tremonti believes that some foreign havens shelter some €550 billion of undeclared Italian wealth, with more than half in Switzerland – principally in the southern canton of Ticino.

Tremonti said last week that he hoped the amnesty, that has to pass an Italian parliament debate and European Union approval, would deliver a telling blow to tax havens.

Britain plans to stage a second tax amnesty in two years this autumn aimed principally at people hiding their savings abroad. The 2007 amnesty is thought to have netted the authorities £400 million (SFr700 million) with estimates ranging as high as £2 billion this time around.

Double whammy

Swiss financial expert Teodoro Cocca, a professor of finance at the Johannes Kepler Institute in Linz, Austria, believes the latest round of amnesties could be more harmful to Swiss banks than previous installments.

Unlike previous years, Switzerland is currently negotiating a fresh round of double taxation treaties with several countries, which will grant greater exchange of information about suspected tax cheats.

“If we combine what has happened to banking secrecy with attractive tax amnesties, that could be very damaging for Switzerland,” he told “This would have the powerful double effect of removing the wall of secrecy and making that hidden money mobile.”

“We could see a lot of money flowing away from banks, especially from the financial centre of Ticino.”

Bankers jittery

The Swiss banking community certainly appears to be taking the matter seriously. Alfredo Gysi, president of the Swiss Foreign Bankers Association and a prominent Lugano-based banker, recently urged Switzerland to broker deals with other countries that taxed bank transfers at source.

“Time is running out for us,” Gysi told Zurich’s Tages-Anzeiger newspaper, referring to Switzerland’s unwelcome image as a tax haven and the growing pressures to reform.

Joachim Strähle, head of Bank Sarasin, told the NZZ am Sonntag newspaper that Switzerland should negotiate tax amnesties for its existing banking clients along with revised double taxation treaties.

Switzerland’s problems would be intensified if other countries followed in Italy and Britain’s footsteps by enacting attractive tax amnesties. Germany’s 2004 amnesty only failed to shift money away from Switzerland because its conditions were too rigid, according to Cocca.

Germany has estimated that up to €550 billion of undeclared money is salted away in Swiss, Liechtenstein and Luxembourg banks.

Effects questioned

However, not everyone is convinced that tax amnesties stop tax cheats from hiding their money away in havens. The Tax Justice Network, an organisation that campaigns against tax abuse, points out that many Italians still dodge the system despite the 2001 and 2003 amnesties.

“It is a weak response that serves very little purpose and in fact encourages the process,” director John Christensen told “It is a rather ineffective way of tackling the tax evasion problem.”

Christensen believes the only way to stamp out evasion is to take the hard line of the United States Internal Revenue Service (IRS) that is publicly pursuing Swiss bank UBS for allegedly aiding tax evaders.

“Too many private deals are taking place below the radar screen and this does not have a deterrent effect,” he said. “The IRS are making this very public with public prosecutions of tax evaders and this is clearly having a strong deterrent effect.”

Matthew Allen,

The Italian government is proposing a third tax amnesty in nine years for citizens that have hidden wealth abroad.

It wants to offer the amnesty on money illegally held abroad as of December 31, 2008 and would impose a 50% tax on the interest rate (assumed at 2% per annum) of repatriated funds.

If passed, the amnesty would run from October 15, 2009, until April 15, 2010.

A second British tax amnesty (following one in 2007) is set to get underway this autumn aimed at residents with accounts at more than 500 British and foreign banks. It will run until March of next year.

It is unclear what penalties offenders will face this time, but those who came clean in 2007 were charged a fixed penalty of 10% of the outstanding tax owed plus interest.

The 2007 amnesty is thought to have netted £400 million with estimates ranging as high as £2 billion this time around.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR