The Spanish government is set to repatriate undeclared money with a tax amnesty as part of a rescue plan for the country’s public finances.

Under the proposal, which was part of the government’s draft budget announced at the end of last week, repatriated wealth will be subject to a 10 per cent charge.

When presenting the budget, which includes spending cuts of €27 billion ($36 billion) in order to get the country’s deficit down to 3.5 per cent from 6.5 per cent, a treasury minister described it as the most austere in modern democratic times.

Mariano Rajoy became prime minister when his centre-right People’s Party was elected in November last year. The country’s unemployment rate was 23.3 per cent in January, higher than Greece’s.

Italy, Spain’s southern European neighbour, has repatriated wealth several times and the latest tax amnesty in 2009 repatriated €135 billion, 98 per cent of which was from offshore tax havens, according to UK's Ledbury Research. The country’s new technocratic government announced in December that assets repatriated in 2009 will be subject to a one-off tax of 1.5 per cent.

In the absence of real economic growth in the Italian economy, tax amnesties have contributed to the development of Italy's domestic wealth management industry in the past decade.