The Kering group, a luxury conglomerate that owns Gucci, Saint Laurent, Balenciaga and Alexander McQueen among other brands, is facing an Italian claim for 1.4 billion in unpaid taxes.
Italian tax authorities completed a tax audit in connection with their investigation pertaining to Gucci’s tax matters in Milan: the source of the problem is “Luxury Goods International” (LGI), a Swiss subsidiary of Kering. According to the audit report, LGI conducted business activities in Italy which should have resulted in payment of Italian corporate taxes.
The audit is mainly focused on Gucci, Kering’s star brand and main revenue driver. The audit started in 2017 when Italian tax authorities carried out checks at Gucci’s Florence headquarters and Milan offices. According to the report, some business carried out by Kering in Milan and Paris was billed through the Swiss unit, incurring lower tax rates.
Kering denies having avoided taxes and states its activities are fully compliant with all tax obligations. In a company statement, Kering said that the group “challenges the outcome of the audit report both on the grounds and the amount.” According to Reuters, Kering “has said that LGI is a substantial firm in its own right, with 600 employees handling inventory, billing and supply-chain logistics, with a business model ‘known to French and other competent tax authorities.’
The Guardia di Finanza – Italy’s financial authority – has increased it’s focus 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, came under the Italian tax authority’s microscope for allegedly failing to pay up.
The auditor’s report will be reviewed by Italy’s revenue agency, which will then make a final conclusion.
by Martina Reich
