San Marino Looks For New Role, As Italy Investigates Possible VAT Fraud
Wednesday, February 24, 2010
San Marino’s government has begun an examination into all aspects of
its economic future, particularly its relationship with Italy, but has been
thrown off course by Italian investigations into possible value added tax (VAT)
fraud involving San Marino.
Following the country’s recent difficulties, caused partly by the global
economic recession, but also by the necessity to put in order its reaction to
new international tax and banking secrecy regulations, San Marino’s government
is looking at all possible solutions to re-launch its economy.
It is recognized that measures will be required, including new commercial regulations
and laws regarding residency and a modernization of the country’s bureaucracy
to attract corporate investment. In that respect, the government has committed
San Marino to a rapid implementation of all European Union regulations, and
the conclusion of all agreements which could be useful in helping the country’s
At the same time, it is particularly looking for a normalization of its relationship
with Italy as soon as possible. It feels that the previous efforts it has made
to collaborate and achieve tax transparency with Italy have not, in its view,
been sufficiently recognized by that country.
San Marino has hoped for some time to conclude the protocol for the exchange
of tax information to the San Marino-Italy double taxation agreement, which
was signed in 2002 but never ratified.
Conclusion of the agreements with Italy has been delayed, above all, by the
operation of the Italian tax amnesty, which has been extended to end-April 2010.
However, development of normalized relations with Italy has been further affected
by the announcement of investigations into possible VAT fraud, involving San
Marino, by Italy’s Guardia di Finanza (financial police).
It is reported that the Guardia di Finanza is investigating import-export transactions
involving more than 500 companies. In particular, the Guardia has discovered
that, from 2006 to 2008, purchases and sales to and from San Marino and Italy
of computers, mobile phones and hi-fi equipment was, in certain cases, more
than 50% of the total trading volumes of the similar products between Italy
and much larger countries, such as Spain and the United Kingdom.
According to the Guardia, only a small proportion of those transactions consist
of regular trade with San Marino; the remainder being swollen by artificial
trades with the objective of VAT avoidance, and thereby lowering the price at
which they can be sold in Italy.
The Guardia has announced that, out of the 65 companies already investigated,
42 have been charged with tax evasion. The total amount of the transactions
found to have been fraudulent was said to reach over EUR400m (USD544m), with
unpaid VAT of EUR125m. Those figures can be expected to rise significantly as
further cases are verified.
In addition, in the same regard, the Guardia has doubled its presence on the
borders between San Marino and Italy in order to check vehicles suspected of
illegal trafficking in goods and money.