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(Bloomberg) -- Swiss Finance Minister Eveline Widmer- Schlumpf and her Italian counterpart Pier Carlo Padoan agreed to resolve the two countries’ long-running dispute over undeclared funds in Swiss banks.

Italians with accounts in Switzerland should be able to regularize any untaxed assets via a voluntary disclosure program, potentially benefiting from a reduced penalty, according to an agreement signed in Milan on Monday. Tax authorities can also seek information from their counterparts to catch tax cheats in accordance with internationally accepted standards, the Swiss Finance Ministry said.

“The agreement will improve relations between Switzerland and Italy in the area of finance and taxation after years of controversy and simplify the regularization of untaxed assets,” the ministry said in a statement.

Switzerland has taken several steps to rid itself of its image as a haven for untaxed assets. It has clinched withholding tax deals with the U.K. and Austria, which allow those governments to recoup past-due tax revenue while maintaining bank secrecy. Talks with Italy had dragged on since 2012 as political instability in Italy’s government had prevented decision-making on the ministerial level.

Data Exchange

The Swiss government is also seeking to implement the automatic exchange of bank client information, which would effectively get rid of bank secrecy for offshore accounts. Parliament is expected to vote on the matter, which would implement a standard set by the Organisation for Economic Cooperation and Development, later this year.

This OECD standard will “be introduced between Switzerland and Italy in the future” and is seeking a data exchange deal with Germany in the medium term, Widmer-Schlumpf told reporters in Milan.

Among the tools Italian tax officials may use to find evaders are group queries, in which they request information from the Swiss based on behavioral patters, the Swiss Finance Ministry said.

While no official numbers exist, Italians may have hidden some 185 billion francs ($195 billion) in Swiss accounts, according to a 2009 report from Helvea SA, a Geneva-based brokerage. Total undeclared funds stashed by Italians abroad amount to 230 billion euros ($260 billion), according to a Bank of Italy estimate cited by Il Sole 24 Ore.

Padoan declined to specify how much money Italy would get from the agreement, saying only that it would be “more than one euro.”

The agreement also modifies taxation rules for cross-border commuters.

--With assistance from Catherine Bosley and Jeffrey Vögeli in Zurich and Kevin Costelloe and Chiara Vasarri in Rome.

To contact the reporter on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net To contact the editors responsible for this story: Dan Liefgreen at dliefgreen@bloomberg.net Zoe Schneeweiss

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