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Italian tax amnesty could bring $150 billion home, but at what price?

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MILAN, ITALY – When 50,000 Italians received a letter from the tax office last week, they breathed a sigh of relief. They weren't being billed. Instead, they were given a gentle reminder that they had until Dec. 15 to declare any money illegally held abroad – or else.

The Italian government is desperate to attract capital home in a time of economic crisis, not least to boost tax revenue. The Scudo Fiscale (“fiscal shield") program allows citizens to bring money from offshore tax havens while remaining anonymous and avoiding sanctions for past tax evasion. All they have to do is move their money to an Italian account within the next two months and pay a 5 percent fee.

But critics say the plan is the latest in a long line of amnesties that have created a culture of tax evasion for wealthy Italians.

“The idea, in theory, is to give people a last chance. It should be an emergency measure,” says Paolo Guerrieri, who teaches international economics at La Sapienza University in Rome. “But in practice this is an incitement to tax evasion. Here in Italy these kinds of 'emergency measures' are so frequent that people know they can just wait for the next amnesty,” says Mr. Guerrieri. “It's an insult to honest citizens.”

But those who do hold illegal foreign accounts may have an extra incentive to take advantage of the amnesty this time around, with Switzerland recently relaxing its banking secrecy rules, which increases the odds that Italian tax cheats will be caught. During the G20 summit in March, Swiss authorities agreed to cooperate more with other nations in tracking down tax evasion. The move came following pressure from the US and European countries worried about the impact of tax evasion on their economies.

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