“How can you tell the guy prowling around our banks is an Italian tax inspector in plain clothes? Simple: if he’s reading the Wall Street Journal upside down, he’s Italian.” This joke, currently making the rounds in the Swiss canton of Ticino, goes to show how much esteem they have for us Italians. But its sarcastic tone is also a means of exorcising two demons: irritation and fear. The Swiss are peeved at us because the Italian government has never before employed such strong-arm tactics to repatriate capital. And they are afraid, obviously, of seeing €200 billion vanish from their safes: this is the estimated amount of Italian money held in Swiss banks. More generally, however, what really scares Switzerland is the spectre of losing its image as a tax haven, a reputation on which the bulk of its fortune is built.

The first blow to Switzerland came in the late 1990s, when the scandal broke about the assets of Holocaust victims in Swiss banks: basically, the money left behind by Jews deported to the death camps had never been restored to their heirs. Switzerland argued in its defence that trying to track down the heirs had proved a “mission impossible”. In the meantime, though, the Swiss banks had no choice but to shed some light on their accounts – which, for the first time ever, put a dent in the inviolability myth of Swiss bank secrecy.

Taxpayers fear witch hunt

The second blow ensued last summer when the US, hunting down tax dodgers, forced the big Swiss bank UBS to turn over a whole batch of confidential information. And the third blow came when the OECD relegated Switzerland to the “grey list” of tax havens. This downgrade was subsequently reversed, but it had already sowed doubts in the minds of many investors, who began to wonder whether their money was still safe in and around Lugano. And now, finally, the Italian government’s so-called “tax shield” (an amnesty allowing investors to bring their money back from offshore accounts, subject to a 5% “fee” on the sum repatriated).

This measure has met with protests and scepticism in Italy, but it actually seems to be doing the trick. “Yes, it’s working,” affirms Paolo Bernasconi, who served as public prosecutor in Lugano for 20 years and is now a lawyer and professor at the University of San Gallo in Switzerland. “A great many Italians are accepting the fine. The ‘tax shield’ is working: the witch hunt in Italy is terrorising taxpayers, leading them to believe there’s no bank secrecy anymore in Switzerland,” he says. Other factors are involved, though. Two of the main motivations for squirreling away so much cash in Swiss banks are now fading. The first, the fear of communism, dates back to the postwar era, the second, the fear of kidnapping, to the 1970s. Last week the tax fraud squad raided 76 Italian branches of Swiss banks. So-called “Fiscovelox” devices have been put up on the border at Chiasso to photograph Italian-registered cars entering the country from Switzerland. What is more, there is the rumour, with or without foundation, about plain-clothes tax agents watching the bank exits.

Unprecedented tension

“For as far back as I can remember, there’s never been this much tension with Italy,” remarks Giancarlo Dillena, editor of Corriere del Ticino. “It’s true”, confirms Fulvio Pelli, leader of the Swiss Liberal-Radical Party (PLR). “But it’s the way this ‘tax shield’ was presented that really rubs us the wrong way. There was a systematic misinformation campaign to lead us to believe the Swiss banking system was completed overhauled, that it isn’t safe anymore.” Paolo Bernasconi, though in favour of resuming dialogue with Italy, resents the methods employed: “Not even in the days of the Red Brigades did Italy take pictures of anyone who goes to Switzerland."

Is Switzerland afraid of losing its wealth? “Switzerland isn’t well run because it has foreign money,” Giancarlo Dillena declares. “Quite the contrary: it has foreign money because it is well run. Everything works better here than in Italy. It isn’t by chance that big companies like Zegna have put their headquarters here.” In banking circles, however, fear is beginning to show. Without making a big splash about it, some employees – the most terrified – are already starting in on refresher courses: Swiss bankers want to be able to offer their Italian clients special products to encourage them to invest. The days when they could simply wait around for customers to show up with suitcases full of banknotes are over. So how will it all end? “We are a country with direct democracy,” Fulvio Pelli threatens, “and we could hold a referendum that Italy would regret. We’re small, but woe to those who mess with us."