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Swiss Government Forms Working Group To Calm Italy Tax Relations

ZURICH -(Dow Jones)- The Swiss government Wednesday charged a working group with formulating a strategy in an ongoing tax spat with Italy, aimed at preventing the issue escalating further.

"The working group has the mandate to form a common strategy to calm tax and political relations with Italy and evaluate measures," the finance department said in a statement, without elaborating on potential steps.

Switzerland and Italy have engaged in an increasingly tense war of words over wealthy Italians allegedly hiding their assets through Swiss bank accounts. Last week, the Swiss government said it wants an explanation from Italy's ambassador to Switzerland on why Italian tax police raided 76 branches of Swiss banks in Italy and close to the border of San Marino.

The formation of the group comes shortly after Swiss president Hans-Rudolf Merz decided to suspend negotiations with Italy to revise an existing double- taxation agreement, according to the government statement.

Switzerland is in the process of revising double-tax pacts country-by-country to reflect the fact that the alpine nation will now help foreign tax authorities pursue tax evaders.

The new working group will be led by Switzerland's finance ministry, and include representatives from the foreign and economic ministries.

Italy, Switzerland's immediate neighbor to the south, is the latest in a string of countries that have indicated they will step up pressure on Swiss accounts. Under Economy Minister Giulio Tremonti, Italy has launched a generous amnesty plan allowing Italians to repatriate some EUR500 billion in estimated capital in offshore centers such as Switzerland.

Government Web site: http://www.admin.ch

-By Katharina Bart, Dow Jones Newswires; +41 43 443 8043; katharina.bart@ dowjones.com

  (END) Dow Jones Newswires
  11-04-091103ET
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