ROME Italian police have smashed a major tax evasion ring that smuggled 1 billion euros ($1.32 billion) a year for prominent show business, business and banking figures into the tiny state of San Marino, prosecutors said on Tuesday.
The Rome prosecutor's office said the system served about 1,500 clients and had been operating since at least 2000.
Tax evasion is estimated to cost Italy 120 billion euros a year, and cracking down on the practice has been a key part of recent efforts to reduce a huge public debt, equivalent to nearly 130 percent of annual output.
A prosecutors' statement said managers of the now defunct San Marino Investimenti (SMI) group smuggled money into the world's smallest republic, an enclave in northeast Italy, then invested it in low-tax jurisdictions such as Panama, Luxembourg and the U.S. state of Delaware.
Seven former SMI employees are under investigation on suspicion of international conspiracy, money-laundering, and providing illegal investment and financial services, the statement said. No charges have been brought so far.
SMI went into receivership last year.
Italy has one of the world's highest rates of tax evasion, with recent investigations ensnaring fashion designers Domenico Dolce and Stefano Gabbana, and a government minister forced to resign after it emerged she had avoided property tax.
Former Prime Minister Silvio Berlusconi is awaiting the result of a final appeal against a conviction for complicity in tax fraud at his Mediaset empire.
($1 = 0.7580 euros)
(Reporting by Naomi O'Leary and Massimiliano di Giorgio; editing by Barry Moody and Paul Taylor)