The opportunity being offered to Greek taxpayers through the «Settlement of Outstanding Tax Cases» (Law 3259/2004) is a turning point in the country’s tax history. Contrary to the experience in other countries, never before had Greece adopted «tax amnesty» policies. The innovation of the law is to be found in Article 38, referring to the repatriation of funds which are currently kept either in foreign bank accounts or other official investment assets. Looking at the draft budget for 2005, it becomes immediately obvious that the Greek government is counting on the revenues expected due to the application of Law 3259/2004. In the budget, the government is projecting the repatriation of 13.3 billion euros – out of a total of 100 billion euros thought to be held abroad by Greek residents – with the public coffers expected to be pumped with taxes equal to 3 percent of that amount. Of course, the multiplier effect of such a large capital injection into the Greek economy is not included in the projected immediate benefit for public revenues. Also excluded are the effects on jobs among those professionals who will be called upon to assist in «managing» the capital injection to Greek financial and possibly to other markets. Yet, by simply becoming state law, the tax amnesty does not guarantee its final success. Besides working out some technical specifications, creating a feeling of trust toward tax and other authorities among those who can take advantage of the law’s provisions is crucial for its success. Projecting a positive outlook for the Greek economy is even more important. Foreign experience Tax amnesty plans have been applied more or less successfully in many other countries, and in many cases taxpayers were offered more than one chance to report their unreported income or assets. Argentina is a case in point. In 1987 it attempted to repatriate funds deposited abroad, with two major stipulations: that the repatriated capital be invested and that for each peso owed to the tax authorities, another one should be paid. Not surprisingly, the repatriation effort collapsed and, eight years later, Argentina declared a general tax amnesty, this time with considerable success. France’s effort was also unsuccessful. By contrast, India’s effort in 1997 gathered $2.5 billion tax receipts, about 8.5 percent of the annual total. Ireland was similarly successful in 1988, when it combined a tax amnesty with a radical restructuring of the tax system. The closest model to what Greece is now trying to achieve is Italy’s. Italians have long adopted tax amnesties, beginning with the so-called scudo in 1982. The recent Tremonti Law – named after Finance Minister Giuglio Tremonti – provided for repatriation through Italy’s bank system with a 2.5 percent tax and no further obligations. This brought 1.4 billion in taxes to state coffers and an inflow of 56 billion euros into the banking system. It is estimated that 12 percent of Italian funds abroad were repatriated. Effects in Greece A tax amnesty will: – Provide the state with an immediate revenue injection; – Reduce significantly the likely court expenses from tax cases that the state would bring to tax courts against delinquent taxpayers; – Help boost investment and create permanent revenue sources from those investments. As a consequence, jobs in private banking will be created; and – Make several delinquent taxpayers re-enter the system. There are two points, however, which could prove negative: first, the fact that, by nature, tax amnesty schemes are «circumstantial» and, second, the possibility of it working counterproductively, that is as a disincentive for honest taxpayers to continue to report all their income and assets to the tax authorities. That’s why several countries used a referendum to adopt tax amnesty schemes. The Ministry of Economy and Finance has not yet published a circular on repatriation of capital. The law has already been in force since August 4 and, unless an extension is given, the deadline for repatriating funds is February 4, 2005. In order for the amnesty to work effectively, the following factors are a must: 1. The ministry should circulate as soon as possible the guidelines concerning the procedures, technical details and terms for the repatriation of funds; 2. The time allowed for tax amnesty should be extended, since four months is a short time to inform the public and complete the procedure. Experience shows that tax amnesty schemes lasting less than eight months do not achieve the expected results; 3. It must be made clear to the public that this will be a unique opportunity and that there will be no «second chances,» as in Ireland. Otherwise, the amnesty would be counterproductive for reasons previously explained; 4. Assurances must be offered to the public that facts and figures collected through the process of the tax amnesty will not be used in any other way or for any other reason in the future; 5. The finance system, including banks and investment firms, must be mobilized to assist and offer its services as needed; 6. The public should be informed about changes to take place in the tax framework of other European Union countries or in the so-called tax havens of the world, as well as in Switzerland, within the next few years; and 7. Information and advertisement: In similar experiences in India and Italy, for example, media and advertisements played a major role in attracting taxpayers to take advantage of the tax amnesty scheme. The law, when accompanied by the necessary circular, will include all the conditions to provide incentives to those who wish to repatriate their capital. Past experience shows that when the tax amnesty is applied with no strings attached it can provide the government with significant revenue. Given the country’s fiscal problem, this is an opportunity that must not be squandered. This is provided we learn from the experience of previous similar efforts to maximize the benefits and we do not proceed, as in the past, slowly, opportunistically and without a longer-term view. (1) Antonis Abazis is a representative of Banca del Gottardo.