October 10, 2009

Italian Tax Evaders Repatriate Funds at Record Pace Amid Slump

By Elisa Martinuzzi

Oct. 9 (Bloomberg) -- Italian tax evaders, lured by the country’s third amnesty since 2001, are repatriating funds at a record pace as the recession prompts them to pump cash into their companies.

“We’ve already received interest for twice as many funds that may be repatriated as in the previous amnesty,” Luca Caramaschi, head of private wealth management at Deutsche Bank AG in Italy, said in a telephone interview from Milan.

Italy’s parliament voted last week to forgive past false accounting under the amnesty, allowing companies to repatriate funds. Asset managers say the amount moving back home is poised to exceed both previous amnesties combined, when about 80 billion euros ($118 billion) was returned. Evaders have until Dec. 15 to apply for pardon in return for a 5 percent fee.

“There’s definitely an acceleration of interest,” said Giuseppe Marino, a tax consultant, author and a professor of fiscal law at Bocconi University in Milan. “It’s driven by the need to inject fresh capital in companies.”

Prime Minister Silvio Berlusconi has pledged that Europe’s most indebted nation will spend the proceeds from the amnesty on state universities and health care. Finance Minister Giulio Tremonti said last month the measure will help small companies stay afloat as the economy emerges from recession. Italy’s economy is set to contract about 5 percent this year and tax income is shrinking, according to the Ministry of Economy.

‘Moment of Crisis’

“In a moment of crisis, we expect a return of company money,” Attilio Befera, who runs Italy’s tax collector, the Agenzia dell’Entrate, said yesterday at a Milan briefing organized by Mediolanum SpA, the financial services firm partly owned by Berlusconi. Befera declined to estimate how much he expects to be repatriated.

While entrepreneurs are likely to account for the bulk of repatriations, older people who have stashed personal savings outside Italy are also seeking to move money back to share with family members, said Ferruccio Ferri, chairman of UBS AG’s Italian fiduciary unit, which administers client assets.

“Estates held abroad are re-emerging in notable dimensions,” said Ferri. UBS has about 16 billion euros under management at its Italian wealth management unit. “There’s been a significant increase in interest this early on in the amnesty.”

The push by Group of 20 leaders to target tax havens and clamp down on money laundering may also be boosting repatriations, according to Bocconi’s Marino, author of “Paradisi e paradossi fiscali,” (“Fiscal Paradises and Paradoxes”) published by Egea in 2009.

“The global context this time is different,” said UBS’s Ferri. “It’s not just an Italian initiative.”

The amnesty started on Sept. 15. The tax collector will take into account the complexities involved in moving assets, Befera said. Evaders can send in their paperwork after the deadline expires if they have paid beforehand, he added.

“There may be some difficulties given the relatively short timeframe,” Francesco de Ferrari, chief executive officer of Credit Suisse Group AG’s private banking unit in Italy, said in an e-mailed response to questions. “Interest is very strong among individuals and entrepreneurs.”

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

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