Domenico Dolce and Stefano Gabbana don’t really seem like the kind of guys who would purposefully not pay taxes on a billion dollars of income, but tomorrow they’ll find out if they have to go on trial for doing just that.
The Italian tax police have been investigating the designing duo for years now, claiming that in 2004 when they sold their brand to Gado, a Luxembourg-based company that that they sort of own, they duped Italy’s revenue service out of the taxes and dues it should have earned from the sale. The New York Times explains:
Prosecutors contend that the Italian revenue service was duped out of taxes on the sale of the brands, which they claim were sold well below market value, and on the income from royalties, which were taxed in Luxembourg at a much lower rate than they would have been in Italy. The brands were sold for €360 million, or $508 million — an amount that investigators say was just under a third of their actual value, according to their own calculations.
The designers have been famously quiet about the whole thing, refusing to comment except for a statement released in WWD last year, which claims that the charges are just as trumped up as the amount of money the designers earned for the sale.
“It’s a paradox! Since when does one have to pay taxes on money one never actually collected,” the designers said in a personal statement. “It’s an absurd demand based on a completely abstract calculation. This higher taxable sum…is a virtual figure we have never received, the result of a theoretical accounting exercise.”
But if the amount the company is actually worth is theoretical, the consequences here are anything but. Dolce and Gabbana (the men, not the company) are being charged with purposefully defrauding the entire nation of Italy. And that’s a pretty big deal.
We don’t know where the chips will fall, but we’ll continue to update this story as more information becomes available.
Dolce and Gabbana May Face a Criminal Trial for Tax Evasion [The New York Times]