Gucci is being probed as part of an investigation by Milan financial authorities as a result of suspected tax evasion. According to Italian publication La Stampa on Saturday, Italian tax police visited the Milan and Florence offices of the fashion company brand in connection with Gucci potentially paying “taxes on profits generated by sales in Italy in another country with a more favorable tax regime.” The company is said to have boasted 1.3 billion euros ($1.5 billion) in unpaid taxes beginning in 2010.
Per WWD, “The money in question involves revenues from activities that were registered in Lugano, Switzerland, but which would have been linked to the work of managers formally based in Lugano, where companies tend to be subjected to a more favorable tax regimen than in Italy, but actually working in Milan.” (Note: Lugano is also home to the headquarters of many Italian luxury companies, including Gucci, which have relocated to the Swiss city due to its preferable tax treatment)
In addition the the brand itself, La Stampa reports that Gucci’s current chief executive officer Marco Bizzarri and his predecessor Patrizio Di Marco are both under investigation, as well.
Carmine Rotondaro, a former financial manager for Gucci’s parent company Kering, is said to have had a hand in initiating the tax evasion probe involving Gucci and is collaborating with Italian prosecutor, Stefano Civardi, who is leading the case. Rotondaro appears to have gotten into the mix after he was accused of tax evasion by the Italian tax police last year.
A spokesman for Gucci said in a statement to Reuters, “Gucci confirms that it is providing its full cooperation to the respective authorities and is confident about the correctness and transparency of its operations.” Contacted by Reuters, a spokeswoman for Kering said the group had no further comment.
The Gucci-specific reports come after Italian tax authorities have stepped up their game amid a European sovereign debt crisis that has put pressure on public finances. The Guardia di Finanza – Italy’s financial authority – has focused on the use of foreign European subsidiaries through which Italian companies, particularly in the luxury sector, have allegedly masked profits. Switzerland, Ireland, and the Netherlands emerge as the favorite destinations, with strategies such as the “Dutch sandwich” and the “double Irish.”
As a result, a slew of big-name Italian fashion figures became the targets of Italian tax evasion crackdowns over the past several years. Dolce & Gabbana founders Domenico Dolce and Stefano Gabbana, Prada’s chief executive officers Miuccia Prada and Patrizio Bertelli, Giorgio Armani, the Bulgari family, and former Valentino chairman Matteo Marzotto, among others, came under the Italian tax authority’s microscope for allegedly failing to pay up.