Italy’s tax-evasion amnesty an easy way to dodge their crime

Italy’s tax-evasion amnesty offers an easy way for dodgers to wipe away their crimes without imposing penalties tough enough to deter future transgressions, former Prime Minister Romano Prodi said in an interview. Italians, who’ve had to pay a 5 percent levy as part of the amnesty, have so far declared about 95 billion euros ($129 billion) in savings stashed abroad, the tax-collection agency said on Feb. 20. Greek Finance Minister George Papaconstantinou, seeking to plug a budget gap of 12.7 percent of gross domestic product, said on Feb. 9 he would introduce a similar measure.

The Financial Action Task Force, a Paris-based watchdog set up in 1989 to fight money laundering, told the Italian government in October it had “concerns” that the tax amnesty would be used by organized crime and others to launder money. The measure has drained money from some foreign banks, including Switzerland’s Credit Suisse Group AG, which said that about 5.6 billion Swiss francs ($5.2 billion) in client assets left through the amnesty in the fourth quarter.

This is the third such amnesty backed by Italian Finance Minister Giulio Tremonti and Prime Minister Silvio Berlusconi in eight years, and it has been extended until April 30.

Black Market

The black market “is the biggest problem for all southern European countries,” said Prodi, 70, who is also a professor of industrial economics and was European Commission president from 1999 to 2004. “In Italy, it’s particularly serious.”

Italians declare an average annual income of 18,373 euros, a fraction of their real wealth, contributing to an underground economy worth about 19 percent of gross domestic product, Rome- based research group Censis said in December. The black market may account for a third of all economic activity in Greece, the Finance Ministry there says.

The tax-shield constitutes “state-sponsored money laundering,” Antonio Di Pietro, leader of the opposition Italian Values party and a former anti-corruption prosecutor, said when the measure was passed in October.

Italy’s main crime groups boosted their profit by 12 percent to more than 78 billion euros in 2009, Rome-based anti- racketeering group SOS Impresa said on Jan. 27. The Sicilian Mafia, the Camorra in Campania and the ‘Ndrangheta in Calabria control both the real and underground economy in much of Italy’s south. While the tax shield may help criminal syndicates launder money, the 500-euro note also contributes to tax evasion and criminal activity, Prodi said.

500-Euro Notes

“It strikes me that I never see them in circulation, and yet European Central Bank statistics show that there are many out there,” Prodi said. “Since they are not seen, they have to go somewhere.”

The U.S. Drug Enforcement Administration last year said the large bill eases the transport of “dirty money,” a statement that Prodi said was probably true. A million dollars in $100 bills weighs about 22 pounds (10 kilograms), while $1 million in 500-euro bills at the current exchange rate of about $1.38 per euro weighs about 3.5 pounds, said Russell Benson, the DEA’s regional director for Europe and Africa.

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February 25, 2010 < Back