Italians furious over plans to grant amnesty to tax evaders

Italy's opposition and the largest union attacked Silvio Berlusconi's government yesterday over an amnesty that would wipe the slate clean on offences including accounting fraud for money hidden abroad.

"This is a disgrace to honest people and an incentive to tax evaders. The message is: don't you see it pays not to pay taxes," said Concita De Gregorio, the editor of L'Unita, the main opposition newspaper.

The centrist senator Gianpiero D'Alia said the move was "shameful" and told the senate: "With this, Mafiosi and terrorists can repatriate illegally gained capital without any control by the state." The controversy flared after a senate committee on Tuesday approved extending the scope of the proposed amnesty to include money kept hidden abroad through accounting fraud.

The amendment was approved by the full senate yesterday, prompting a walkout by the opposition.

Prime Minister Berlusconi's centre-right government has approved Italy's third tax amnesty in nine years, in a bid to boost government revenues during the downturn by bringing back into the economy billions of euros held abroad by Italians. The latest amendment allows Italians to wipe the slate clean on undeclared funds hidden abroad by paying a 5 per cent penalty.

The entire package must be approved by the full senate and lower house. The government has defended the plan, saying it is better to have capital at work in Italy rather than hidden abroad and that in future all undeclared money abroad will be considered the fruit of tax evasion.

"This is the stuff of rascals," said Guglielmo Epifani, the head of Italy's largest trade union, the CGIL.

Bank sources estimate that Italians have about €600bn (£540bn) in foreign tax havens and bankers have said that this year's amnesty could bring back more than the €80bn repatriated under two previous amnesties.

Under the amnesty, individuals or companies with undeclared money abroad would be able to repatriate it or keep it abroad and regularise it by paying a fine. "This is nothing less than a gift to the white-collar class and an insult to the principles of ethics and fairness," said Giuliano Barbolini, from the opposition Democratic Party.

Even centrist politicians who had reluctantly approved the original version of the tax amnesty on the grounds that it would help the economy at a time of crisis opposed the false accounting provision.

Pier Ferdinando Casini, a former Berlusconi ally who heads the centrist UDC party, said that the amendment was unacceptable. "We have always made speeches about the need for ethics in the economy and what do we do now, just erase all that?"

Economists said that the amnesty should reap a cash injection during Italy's worst post-war economic slump but have warned that it risks encouraging tax evasion over the long term.

The Economy Minister, Giulio Tremonti, vowed last year not to resort to amnesties again but then approved one this year.

Under the latest proposals, Italians would have until 15 December to take advantage of the amnesty after it is approved by parliament and the Italian President.