Kering is expected to pay between 1.3 and 1.4 billion euros ($1.5-1.6 billion) to settle a nearly year-and-a-half dispute 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. According to sources of Reuters – the Paris-based luxury goods conglomerate, which owns Gucci, Saint Laurent, Balenciaga, and Alexander McQueen, among other brands – “is expected to sign an agreement with the Italian tax authority within the first few days of May.”
While a representative for Kering told Reuters that it has been cooperating with the Italian tax service, “No agreement has been reached yet on any specific figure.” If the parties do ultimately agree on the $1.5-1.6 billion sum, it will be “the biggest tax settlement ever agreed by a company with the Italian tax authorities,” per Reuters.
The news of settlement talks comes three months after Kering revealed that the audit unit of the Italian tax authorities “completed a tax audit” in connection with their investigation “pertaining to [Gucci’s] tax matters in Milan,” and found that “Luxury Goods International, a Swiss subsidiary of Kering, conducted business activities in Italy which should have resulted in payment of Italian corporate taxes.”
The results of the audit – which were subject to review by the Revenue Agency unit – from claims that the luxury goods giant has 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 have “challenged the grounds” of the tax police’s probe.
Gucci is hardly the first Italian house to come under fire for tax-related claim. In fact, financial crackdowns have become commonplace, with the Guardia di Finanza – Italy’s financial authority – investigating a recurring handful of big-names on a regular basis and for the most part, settling its investigations by way of monetary payments out of court.
In response to the European sovereign debt crisis that has put pressure on public finances, Italian tax authorities have stepped up their game in recent years and have focused on the use of foreign European subsidiaries through which Italian companies, particularly in the luxury sector, have allegedly masked profits. 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, have also come under the Italian tax authority’s microscope for allegedly failing to pay up.