Gucci’s parent company Kering has been “under investigation since February 2019 for tax fraud,” the AFP asserted on Wednesday, citing a statement from the French financial prosecutor’s office, and “confirming” an existing report from French news publication Mediapart that regulators are in the midst of probing the Paris-based luxury goods conglomerate over a scheme that allegedly enabled it to avoid $3 billion in taxes between 2010 and 2017, including 180 million euros in France, by declaring business in Switzerland that had been carried out in the less-tax-friendly jurisdictions.
In a statement on Wednesday, Kering – which owns luxury goods brands, including Gucci, Saint Laurent, Balenciaga, Bottega Veneta, and Alexander McQueen, among others – refuted the “totally unfounded allegations of tax fraud,” stating that it “has no knowledge of an inquiry being conducted into its activities, as reported in the article. Should this be the case, the group would cooperate fully with the authorities involved in any potential inquiry with complete transparency and serenity.”
Fast forward to Thursday, and it turns out that Kering is, in fact, at the center of a tax investigation. In a formal release, the François-Henri Pinault-led group says that following “a press article implicating Kering published on line on December 15, 2020, France’s Parquet National Financier (National Financial Public Prosecutor’s Office) has confirmed having opened a preliminary inquiry concerning Kering in February 2019,” noting that it “had not previously been informed of this inquiry.”
The group, which “refutes in the strongest possible terms the allegations contained in the press article and forwarded by other media,” further asserts that “the inquiry appears to be linked to” the activities that resulted in the May 2019 settlement it entered into with Italian authorities after allegedly failing to pay $1.6 billion in taxes in Italy between 2011 and 2017 in connection with its marquee Gucci brand.
The settlement was the highest ever reached between a company and Italian tax authorities, and saw Kering pay $1.01 billion in back taxes, plus interest payments and penalties, as well as an additional tax charge of $673.51 million in its 2019 financial accounts. It followed from claims that the luxury goods giant had been embroiled in a large-scale scheme to avoid paying taxes in Italy, and in an effort to do so, allegedly relocated about 20 employees from its French or Italian offices to Switzerland “as part of the tax optimization scheme, but alleged that some of them continued to effectively work in Italy.”
From the outset, both Kering and Gucci “challenged the grounds” of the tax authority’s probe.