MNI ANALYSIS: Italy Raises Funds Via O'seas Capital Disclosure

--Extra Tax Revenues Towards New Budget Law, Deficit Reduction

By Silvia Marchetti

     ROME (MNI) - Italy's government aims to raise extra tax revenues this year

thanks to the regularisation of foreign-held capitals through so-called

"voluntary disclosure" procedures. Extra tax cash would got into funding both

the new 2018 budget law under definition and in further curbing public deficit. 

     Several officials told Market News they were confident of achieving good

results by year-end through the voluntary disclosure scheme, which they said was

neither a legal repatriation nor an amnesty on "black capital" hidden abroad.

     "Last year we raised over E4 billion through such procedures, these

revenues have helped to fill state coffers and we expect to bring in more cash

in coming months. So far the voluntary disclosure has been a success, each year

results are better and we believe we will have a great outcome this year too,

which pushes us to continue along this path," said a Treasury source. 

     Initially launched in 2015, the voluntary disclosure scheme has already

been renewed twice and the 2017 closing date has been extended to end of

September in a bid to pull in more potential tax-payers. 

     A total of 129,000 overseas capital regularization requests reached Italian

authorities last year, mostly from Switzerland (69.6%), Monaco (7.7%), and the

Bahamas, according to Treasury data. 

     This new approach is a revolution in the way Italy has so far handled

undeclared overseas capital taxation. 

     "We have had a few 'fiscal shields' in the past to repatriate foreign-based

capitals, which is not the right solution in cracking-down on tax dodgers and

boosting tax revenues in the long run," said the Treasury source. 

     The voluntary disclosure has turned out to be more efficient. It is a

communication to the Italian tax authorities of money held in other countries

which will stay in those countries but whoever detains this capital will have to

pay taxes to the Italian state forever, the source explained. It's simple and a

stable source of tax revenue.

     Democrat Giampaolo Galli, member of the Lower House Budget Committee,

pointed-out how it is not a "one-off" but a "permanent" measure that would

benefit state coffers indefinitely with permanent tax revenues. 

     "Once someone has flagged his offshore capital to Italian authorities, he

can still keep these in deposits on the other side of the world. He's not

obliged to bring the capital back home but will from now on pay taxes on these

to the Italian state," said Galli.

     The voluntary disclosure is part of the government's new strategy to

crack-down on tax avoidance by involving potential tax payers without scaring

them by means of penal action, but by making them an active part of the process

in order to avoid future trouble, said the Treasury source.

     Making the tax man appear more "friendly" has certainly had a positive

impact. The number of Italians abiding by the new scheme is on the rise, and tax

revenues from voluntary disclosure have jumped significantly from just E212

million in 2015 to over E4 billion last year, according to Treasury data. 

     "It's a mere form of communication aimed at identifying undeclared capital

abroad. If taxes have not been paid on this extra-territorial capital, the

holders will be granted time to regularize their position and will only be fined

as per law," said the official. 

     "Those who will not abide to the voluntary disclosure will be automatically

tracked down through the OECD fiscal data exchange framework and they will face

a penal trial. Banking secrecy is coming to an end and from now on we will know

who the Italian tax dodgers are and where their capitals are held,", explains

the Treasury source.

     Italy has been one of the promoters in implementing the OECD Tax

Information Exchange Agreement (TIEA) and has recently signed more than a dozen

new bilateral deals with former tax havens and fiscal jurisdictions including

Switzerland, Liechtenstein and the Principality of Monaco to avoid double

taxation and thus international tax avoidance. Italy has also complied with the

OECD action plan against corporate base erosion and profit sharing. 

     Recovering unpaid taxes and combating the massive black economy in Italy is

a tough job but government has introduced new tools that have contributed in

raising tax revenues in 2016 by an annual 3.3%. 

     Galli noted that additional revenues are more than welcome now ahead of the

budget law approval and announced tax cuts by governments, but that the priority

should be the further stabilization of the public finances. 

     "We have pledged to cut our structural deficit by 0.3% this year and

Brussels is watching us so before we talk about tax incentives for youth labour,

we need to stick to our commitment and this is where extra cash must go," warned

Galli. 

     Italy is moving along the same lines of the Estonian European Presidency

that is attempting to push through international transparency protocols. The

European Parliament is expected to approve a corporate transparency text that

obliges multinational companies operating in the EU to cooperate with tax

authorities.

     According to the draft, which still needs approval of reluctant member

states, every company with a turnover above E750 million would have to publicly

release detailed information on its business in every country it is active in.

The move follows steps undertaken to crack-down also on web giants' profits at

EU level. Rome has recently fined several internet giants, including Google and

Apple. 

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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