Italy and Switzerland sign deal to fight tax evasion

Estimates suggest around 70 percent of Italian money hidden abroad is in Switzerland - a non-EU member - with the schemes reportedly costing Italy’s national coffers around €90 billion annually in lost revenue.

"We have estimated additional revenues of just 1 euro in the budget law and the only thing I can say is that we will cash in more than that," Italy's economy minister Pier Carlo Padoan told reporters.

Bloomberg reports the undeclared Italian stash could amount to as much as €230 billion.

Swiss finance minister Eveline Widmer-Schlumpf said the deal would encourage account holders at Swiss banks "to come clean."

Switzerland is keen to improve its image on tax matters amid recent media reports that a Swiss branch of the UK banking giant HSBC was helping convicted criminals and other wealthy clients dupe tax authorities abroad.

The bank worked around a loophole in the 2003 EU-wide European savings directive (ESD) that requires authorities to impose a “withholding tax” on savings interest on offshore accounts.

Last week, Swiss prosecutors searched the offices of the Geneva-based subsidiary.

An international agreement on the automatic exchange of information on accounts also aims to help unravel years of Swiss bank secrecy laws by 2018.

The agreement includes a new global standard put in place by the finance ministers from the G20 of industrial nations and the Paris-based OECD.

But Switzerland has imposed extra conditions on the pact by agreeing to exchange only with countries with which they have “close political and economic ties”.

Transparency campaigners say such reservations work against developing countries because wealthy residents hide their fortunes abroad.

“It’s estimated that 33 percent of African and Middle East-owned assets are held offshore compared to 6 percent of European-owned assets,” according to a Christian Aid report out earlier this year.

The European commission, for its part, aims to make its proposal on the automatic exchange of cross border tax rulings before the summer.

The commission proposal would require a mandatory automatic exchange of information regarding advance cross border tax rulings and unilateral advance pricing arrangements among member states.