The decline of tax havens may embarrass Italians most. Funds in offshore accounts are estimated to be worth the equivalent of a third of Italy’s GDP, so widespread is the practice. For decades, successive governments have let substantial tax revenues slip across the border. Now is a good time to try to get some of that back.
Both government and independent studies estimate offshore accounts come to E500bn-E600bn. That’s enough to buy all the companies listed on the Italian stock exchange, and leave change to spare.
Giulio Tremonti, the economy minister, tried to get at these funds in a previous term in office. He did manage to lure nearly E80bn in a 2001-2003 amnesty. But the main goal then was to get the money back home. Funds could be repatriated with no questions asked and the payment of a meagre 2.5% in taxes. The Treasury earned just E2bn.
Tremonti could do with the money now. Italy’s budget deficit is expected to be 4.7% of GDP this year. And Tremonti has a stronger hand to play against evaders. Sure, money made from organised-crime isn’t likely to come home. But middle class Italians can read the news about the erosion of tax haven secrecy.
Better pay some now in safety than be heavily penalised later.
Germany has reportedly considered imposing a 25% rate on repatriated funds. That’s probably too high for Italians to bear. But a 15% tax on offshore funds and a E300bn homeward flow of capital would be enough to cover two thirds of this year’s government deficit.
That could be ambitious. Tax-shy entrepreneurs may prefer to take their chances across the border rather than let a meddling government get a clear look at their finances. But it’s a good moment for the government to try to empty a few hidden pockets.