Italian Revenue Can Use Offshore Account Holder Lists
The Italian Supreme Court (Corte di Cassazione) has decided that the Italian tax authorities may use details of foreign bank accounts in their tax compliance efforts, even if the data therein was obtained illegally.
In a move that is thought likely to push more Italians with undeclared assets abroad towards the Government’s current voluntary disclosure program, the Supreme Court has now had the final word after previous conflicting judgments from lower courts since the matter was raised back in 2011.
The question arose initially when information was passed by IT expert Hervé Falciani to the French tax authorities in 2008. Including details of more than 7,000 accounts totaling a reported EUR7.5bn (USD8.5bn) held by Italians in Switzerland in 2005 and 2006, the information was then obtained by the Guardia di Finanza, the Italian financial police.
It had been expected that the names of Italians identified from the list would enable the Guardia di Finanza, together with the Italian Revenue Agency, to open new lines of investigation, or re-open dormant inquiries, on the movement of Italian funds in Switzerland. However, its use was questioned in court because the data it contained had been obtained illegally by Falciani.
It was said that such information should not be used as evidence by the Italian tax authorities against Italians with presumed undeclared funds abroad as the appropriation of the list could be classified as an aggravated embezzlement by way of the illicit collection of information contained in a computer system.
However, the Supreme Court has now decided that an alleged illicit action by a disloyal employee has no relevance as to whether the Italian tax authorities can utilize the data it has obtained. The tax authorities, it confirmed, may use “any such circumstantial evidence in their activity against tax evasion.”
In fact, it added, there could not be assumed a right of secrecy (which does not exist under Italian law against action by the tax authorities) over any Italian citizen’s undeclared foreign bank account, while the information could not be said to have been obtained in violation of any Italian laws or by any action by the Italian tax authorities themselves.
The Supreme Court also confirmed that the data was legitimately acquired following a request to the French tax authorities within the exchange of tax information stipulations foreseen in European Union directives and the double taxation agreement between Italy and France. It was emphasized that there could be no presumption that any Italian citizen with alleged undeclared funds should have been warned of the request for assistance from one tax authority to the other or be involved in it, or its outcome, in any way.
Following the Court’s judgment, which will also be valid for any other information obtained in the future in a similar fashion, it is now expected that there will be an increased recourse to the current voluntary disclosure program by Italian overseas account holders looking to regularize their undeclared assets before they become the subject of an audit by the Italian Revenue Agency.
Under that program, voluntary disclosure of undeclared assets must be made by September 30 this year. Participants have to pay all back taxes, but administrative and criminal penalties are greatly reduced. Persons will also be free from criminal prosecution.