Switzerland has complained about being singled out for tougher treatment and resents Italian police "spying" on the border. Italy says it has had enough of Switzerland encouraging citizens to dodge taxes.

This is not the first time Italy has launched a tax amnesty aimed at repatriating hidden funds back home – in fact it's the third in nine years. And increased border surveillance using cameras was also in use during the previous amnesty.

However, such filming and sending undercover tax officials to Switzerland has this time drawn a stinging response from Ticino parliamentarian and leader of the centre-right Radical Party, Fulvio Pelli.

"To be filmed and controlled in secret is unacceptable to Swiss citizens," Pelli wrote to the Italian Corriere della Sera newspaper.

Another repeat feature of the tax repatriation drive is closer scrutiny of wealthy individuals and companies that set up home or operations in Switzerland. Italian officials are demanding proof that such activities are not a front for tax evasion.

Feeling of resentment

Many of the 70,000 Italian nationals living in the southern Swiss canton of Ticino have been left "disorientated" by the edicts emanating from Rome, according to Mauro Baranzini, a professor of economics an Lugano University.

"There is a feeling of resentment. They believe the amnesty is just an instrument of the Italian government that does not know what else to do to reduce its budget deficit," he told swissinfo.ch.

Baranzini added that the cantonal authorities send to Italy 40 per cent of income tax levied on the 55,000 Italian workers who cross the border each day to work in Switzerland.

The mood in Switzerland has been blackened this time by the underlying global tax evasion crusade that has laid siege to the country. Switzerland has already been forced to promise closer cooperation with other tax regimes and to hand over records of UBS bank client to the United States.

Many Swiss interpret this as an attack on sovereignty by jealous countries desperate to paper over the cracks of their own mess with a quick-fix cash injection and to divert blame from their own failings.

Inflammatory language

The rising anger has been further fuelled by some of the language being employed over the border. Italian Finance Minister Giulio Tremonti has talked about "bleeding Lugano's banking sector dry".

The Italian measures represent a direct threat to the lucrative banking sector in the canton's largest city. Unlike previous amnesties, Italians must now repatriate assets from Switzerland to take advantage of the generous terms.

Italy believes up to €125 billion (SFr188.8 billion) of undeclared assets are hidden in Ticino banks, more than half of the worldwide total.

"The problem is not so much the amnesty itself, but the way it is being carried out, such as the way the Italian finance minister expresses himself about the Swiss financial centre," Alfredo Gysi, president of the Association of Foreign Banks in Switzerland, told the Finanz & Wirtschaft newspaper.

The Ticino Bankers Association met Swiss Finance Minister Hans-Rudolf Merz on Thursday to express its concerns. A delegation from the cantonal government is due to meet Merz shortly.

Matthew Allen, swissinfo.ch