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May 20, 2009updated 05 Jun 2017 11:40am

Banks brace for tax amnesties

One of the logical extensions of the ongoing international campaign against offshore finance is the need for tax amnesties to bring undisclosed assets onshore

By William Cain

One of the logical extensions of the ongoing international campaign against offshore finance is the need for tax amnesties to bring undisclosed assets onshore. Speculation on the issue is increasing as details of potential schemes across Europe leak out. William Cain reports.  Private bankers in Italy are convinced a tax amnesty is soon to be unveiled in the country – an initiative which some say could form the blueprint for a wider, pan-European campaign.

The case for tax amnesties is gathering momentum following the G20 summit, held last month, that outlined which financial centres were compliant with international guidelines on tax and secrecy. The G20 nations are scheduled to meet again in Scotland this November.

“It’s unofficial at the moment, but it’s looking like it will go ahead – the governments just haven’t put their finger on the send button for the press release,” said one Italian source.

In an interview with PBI, Saverio Perissinotto, deputy CEO of Intesa SanPaolo Private Bank, says he expects client inflows from amnesties to kick in by the end of 2009.

Swiss private bankers have also indicated support for amnesties in Europe. Eric Sarasin, managing partner at Bank Sarasin, interviewed in the last edition of PBI, said undeclared assets were no longer the future of the industry, and that banks needed to rethink their strategy.

“Most undeclared assets came a couple of generations ago, and the current generation wants a clean sheet of paper, rather than running from the law,” he said.

Media reports claim the Italian government has been asked to work on a programme, based on its Scudo Fiscale I and II tax amnesties of 2001-03, which can be adopted at a Europe-wide level. PBI estimates the two amnesties raised $60 billion in total (see PBI 247) and are considered among the most successful in the last decade.

OECD spokesman Nick Brey said amnesties could be a way of “accompanying the discipline that is being enforced in terms of offshore financial arrangements”.

But Maria Assimakopoulou, a European Commission spokesperson on taxation and customs, said talk of a pan-European programme was “nonsense” and that any potential amnesty was a matter for individual governments.

Research by Merrill Lynch on the topic speculates a potential Europe-wide tax amnesty would carry a tax on disclosed assets of between 2.5 percent and 10 percent. The rate offered by Italy’s Scudo Fiscale in 2001-03 was 2.5 percent.

“Importantly, the tax amnesty plan would also offer anonymity to encourage tax evaders to repatriate funds,” said the research note, written by analyst Derek De Vries.

“Participation in the tax amnesty wouldn’t be mandatory, but any member EU state that wants to launch a tax amnesty would be required to adhere to the EU plan.”

Participation in Scudo Fiscale involved filling out a specific form with a bank and outlining the assets to be disclosed. The process was entirely confidential, which contributed to the success of the program, De Vries said.

One of the key determinants on the success of any initiative are the terms in place for clients who are in a position to disclose. One stumbling block could revolve around what clients are asked to do with their assets once they are repatriated.

Governments are keen to funnel repatriated cash into government bonds, given the huge amount of issuance which needs to take place over the coming years to pay for financial bailouts and stimulus packages. Earlier this year, it was reported Spain was looking at giving wealthy individuals with undeclared money total immunity from prosecution, provided they invested their funds in public debt.

An article in Spanish daily El Mundo said a Royal Decree would ensure the money could also be repatriated free of tax and that the obligation for investors to identify themselves would be cancelled.

Amnesties - credit Suisse Amnesties - ubs

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