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Wednesday, November 14, 2012

Beating tax cheats key to Italy's recovery plan





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 — which are also notorious for making cheating the taxman a way of life.

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.

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.

The Ferrari-driving plumber hid some €2 million ($2.6 million) of his income over several years by giving his customers invoices -- for jobs ranging from fixing leaks to installing new bathrooms -- for the actual cost of his work, but kept a second, false registry of much lower figures for tax purposes, said Pescara tax police Col. Mauro Odorisio.

The number of phone calls from the public to the tax police's hotline to report stores, restaurants and other businesses that didn't give customers sales receipts has almost doubled in the first nine months of this year, compared with the same period in 2011.

Greece saw demands for tax system reform from international rescue creditors added on to conditions for future rescue loan payments, as Greek authorities acknowledged that a high-profile campaign to crack down on major tax cheats has produced disappointing results.

[...] Italian tax police are chasing after cheats who have shown some of the most chutzpah about not paying their fair share of taxes, like the Padua woman who advertised on the Internet that she had a couple of "cash-only" bed and breakfast rooms to let.


READ THE ORIGINAL POST AT www.sfgate.com