Telegraph, Nick Squires
San Marin o turns on bogus residents over tax avoidance
The tiny European sate of San Marino is to conduct an emergency census of its population in an attempt to expose tax avoiders who have made bogus residency claims.
The world’s oldest republic is trying to clean up its tarnished image. The mountain republic’s stoutly defended battlements have offered a haven from persecution for centuries but provide no protection from the worldwide financial crisis.
The tax haven, which grew rich from no-questions-asked banking practices, is under pressure from Italy, the European Union and the G20 group of nations to become more transparent in its financial dealings.
“It’s been a very bad time for San Marino,” said Antonella Mularoni, the state’s foreign minister. “But we are responsible for many of the problems we have encountered.”
In September the tiny state plans to conduct a census of its 31,000 inhabitants to winkle out people claiming to live in San Marino, where they pay low taxes and have access to secret bank accounts and generous pensions, when in fact they reside in Italy or other countries.
Sammarinesi say that the country – a landlocked state of about 24 square miles officially called the Most Serene Republic of San Marino – is going through its worst crisis since the Second World War.
Then, as a neutral state, it provided protection for 100,000 refugees and was mistakenly bombed by the RAF in a raid that killed 60 people.
“There’s a lot of worried people,” said Roberto, a hotel manager working in the republic’s warren-like medieval centre. “This time the authorities mean business. They are threatening to revoke people’s residency.”
The inquiry into exactly who is entitled to live in the world’s oldest republic is part of San Marino’s efforts to clean up its tarnished image.
The republic must fulfill 12 financial transparency conditions to be removed next month from a list of tax havens under scrutiny by the Organisation for Economic Cooperation and Development. An ill-timed money laundering scandal at its most prominent bank has provided ammunition for its foreign critics.
Five senior executives at Cassa di Risparmio della Repubblica di San Marino, the biggest bank, were arrested by Italian police in May. Italy’s central bank placed the bank’s consumer finance group, Delta, under bankruptcy proceedings.
When Italy declared war on tax evasion in July, newspapers were quick to level charges against the inland citadel. Headlines blared: “San Marino’s dirty money” and “Scandal in San Marino”.
An amnesty for Italians who repatriated money from offshore centres threatens to hurt San Marino’s financial pillars.
“Relations with Italy have been very, very tense,” said Ms Mularoni. “But we cannot afford to have a bad relationship.
Italy can create problems for us because we are so small and because we rely on them for so many things even our water.”
A broader downturn in the San Marino economy is compounding the gloom on the streets. Last year two million day-trippers flocked to San Marino for its duty free shops (“Fred’s Spirits – cheap booze and free drinks!”) and impeccably restored battlements perched on top of a 2,000ft limestone cliff.
But there has been a 7.5 per cent drop in numbers this year.
“We are hard working people and we feel very hurt and offended by all this,” said Antonio Macina, the director of tourism.
“It’s the Italians coming here who are causing all the problems, not Sammarinesi going to Italy.”
Biagio Bossone, the chairman of San Marino’s central bank, said: “Now when one talks of San Marino, it is spoken of badly. It seems as if the world is against us.”
San Marino facts
– Entirely surrounded by Italy, San Marino is Europe’s third smallest independent state, after Monaco and the Vatican.
– It is a historical anomaly, the only city state to survive Italian reunification in the 19th century.
– It is perched on Monte Titano, a limestone crag six miles from Italy’s Adriatic coast.
– With a population of 31,000, it covers a territory of just 23 sq miles.
– Legend has it that a stonemason founded the republic in AD 301 for a small community of Christians seeking refuge from the emperor Diocletian. In recent years it has become a haven for Italians hiding their money from the tax authorities.
– In 1861, U.S. President Abraham Lincoln accepted San Marino’s offer of honorary citizenship in a letter that read: “Although your dominion is small, your State is nevertheless one of the most honored in all history.”
– In 1849, Italian hero Giuseppe Garibaldi sought refuge on San Marino when surrounded by enemy armies.
– In the Second World War San Marino was neutral and gave sanctuary to 100,000 refugees.
– It has been occupied only twice in its 1,708-year history, once in 1503 by Cesare Borgia, son of Pope Alexander VI, and by the forces of Cardinal Giulio Alberoni in 1739.
– Despite its small size, it has 12 banks and 55 other financial institutions, including life insurers and asset managers.