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Beating Tax Cheats Key To Italy's Recovery Plan

FRANCES D'EMILIO

ROME (AP) â¿¿ Good plumbers may be worth their weight in gold, but when one was spotted zipping around in a bright red Ferrari, Italian tax police were fast on his trail.

Stamping out entrenched tax evasion is crucial to Premier Mario Monti's quest to keep Italy from succumbing to the European debt crisis, and it is critical to fellow eurozone members in more dire straits, such as Greece and Spain â¿¿ which are also notorious for making cheating the taxman a way of life.

Indeed, Greece's international rescue creditors have been pressing Greece for two years to reform its ailing tax system, citing poor collection as a key factor keeping the country mired in crisis. In Spain, where tax fraud is rampant, as much as ⿬90 billion ($115 billion) is lost each year to tax fraud -- the equivalent of the country's national debt, according to Spain's main tax inspectors union.

To succeed in Italy, authorities will have to catch the legions of self-employed and small business owners who brazenly lie about their earnings, like the plumber in the eastern town of Pescara, who socked away undeclared income in 30 bank accounts, or a successful pastry shop owner in Calabria, who on his tax return claimed he was earning next to crumbs.

And those are the less sophisticated schemers.

Tax police officials say that wealthy Italians, their companies and foreigners who make their money in Italy are increasingly trying to avoid taxes by using such strategies as falsely declaring that their base of operations or residence is abroad.

Another daunting challenge is the so-called "submerged" economy, a term embracing Italians who declare only a fraction or nothing at all of their earnings -- and dentists, lawyers, doctors and other big-earning professionals are frequently among the worst offenders.

Tax evasion of all types in Italy every year totals about euros 240 billion ($300 billion), or 15 percent of the country's gross domestic product of ⿬1.6 trillion ($2 trillion), tax police estimate. The massive amount amounts to more than a third of Italy's yearly total receipts from tax ⿿ euros 676 billion ($860 billion), according to 2011 figures from Eurostat.

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