Posted Mon Feb 01 22:14:00 UTC 2010

The outcry was huge when Italy’s government announced the “Scudo Fiscale” in October last year. “Scudo” means ‘protection’ or ‘shield’ and that’s how Italy called his program to repatriate foreign parked money. But, what is the reason to enforce such a tax amnesty – already the third since year 2001?

The ‘Tax Shield’ is based on a lower penalty tax of only 5% for those who report their accounts of “black money” they have with foreign banks - where most of them are in Ticino. Why Ticino? Well, it’s a canton of Switzerland where the official language is Italian and Lugano - Switzerland’s third biggest banking centre - is only a half hour away from the Italian border. In addition, 80% of all financial services in Lugano and Chiasso are performed for Italian clients.

However, “Scudo” is basically a kind of safety shield against the loss of more money by not taking advantage of the offer. There is even a bigger treat to this third tax amnesty – the so called “Juristic Repatriation”. Financial delinquents are able to transfer the administration of finances of their “black money” to an Italian trustee corporation which will assert a right of tax amnesty. The trick is the following: the investment still remains with the respective bank in Ticino. First of all, this is supposed to encourage more delinquents to declare their “black money” accounts they have, secondly, the Italian treasury would collect even more taxes and thirdly, there wouldn’t be that many clients leaving Ticino banks as feared in the very beginning. Thanks to this ‘juristic repatriation’, legalized assets will remain within Swiss bank accounts and these clients also remain clients of these banks.

Italian media report that 80% of all newly declared assets, about 110 billion Swiss Frances, are deposited in Ticino. Media presumes that two-third of all money managed in Ticino (estimated 400 billions Swiss Francs) is based on business with Italian clients. So far, tax wise, there are 95 billions legalized in connection with the third “Scudo”, compared to 75 billion during the first two amnesties. Many of the banks in Ticino are quite lucky under the circumstances and remain managing at least 60% to 65% of these newly legalized money as investment, but there are also a few banks which had to close their Ticino branches in result to quite some losses.

Despite ongoing discussions about Switzerland’s role in the world wide financial business, the country known for its Swiss banking secrecy will still be a good choice to manage investments.

Posted By: Peter Rabitz