Another day. Another Italian tax dispute. Last week I talked about how Domenico Dolce and Stefano Gabbana are two of many Italian designers and brands that have been embroiled in tax disputes with the Italian government. Well, it seems that the design duo have lost their case.
Both designers and their accountant, Luciano Patelli, had appealed a lower court’s decision finding them guilty of tax evasion. And, today, the appeals court upheld that decision. The designers and their accountant were sentenced to one year and 6 months of jail time (though none of them will actually serve jail time because the sentencing is below the two-year minimum required in Italy).
As mentioned before, the duo were charged with tax evasion over the sale of their namesake brand to the Luxembourg-based holding company, Gado Srl, which the Italian tax authority believed was done to avoid higher corporate taxes in Italy. The designers have constantly and vehemently denied any wrongdoing. Their lawyer has stated that they will be appealing the decision to Italy’s equivalent of The Supreme Court.
The Italian government has been cracking down on Italian designers’ operations of their brands. As mentioned last week the Armani Group settled their dispute with a payment of $373 million. And, Prada Holdings also settled with a payment of $420 million and an agreement to relocate the holding companies from Netherland and Luxembourg back to Italy.
It will be interesting to see how the Dolce & Gabbana case will play out in the Supreme Court, as this case can serve as a benchmark for future similar cases. It will also serve as a warning to all Italian brands and clothing companies, who have in the past and may in the future attempt to minimize their costs by moving the operations of their companies out of the country and in lower tax countries like Luxembourg and the Netherlands.
- “Dolce, Gabbana Found Guilty of Tax Charges“, Women’s Wear Daily
- “Dolce & Gabbana Found Guilty of Tax Evasion, Sentenced To Jail (Again)“, Fashionista.com