Milan—An Italian appeals court today upheld the conviction of designers Domenico Dolce and Stefano Gabbana on charges of hiding millions of euros from tax authorities.
The design duo had been given a sentence of 18 months in jail but won’t actually serve any time because in Italy only prison sentences over two years have to be served.
Dolce’s brorther, Alfonso, Dolce & Gabbana general director Cristiana Ruella and finance director Giuseppe Minoni were sentenced to one year and two months in jail.
An attorney for the pair, who had a fine of up to 10 million euros levied on them, said they would appeal today’s decision. “I am speechless. We are all shocked. The judgment is inexplicable and we will appeal,” Massimo Dinoia said after the judgment.
The decision comes in the wake of a verdict last June charging that in 2004 Dolce and Gabbana sold their D&G and Dolce & Gabbana brands to Gado, a Luxembourg-based holding company, allegedly allowing them to avoid Italy’s notoriously high corporate tax rate and may the lower rate in Luxenbourg. Prosecutors said they avoided paying taxes on royalties of about 1 billion euros (about $1.38 billion).
Italy stepped up investigations into tax evasion in 2008 when the global economic crisis hit. While few cases ever came to court, the fashion industry received particular scrutiny since it performed well even as the rest of the country suffered from the longest recession since World War II.
Giorgio Armani paid 270 million euros to tax authorities in early April to settle a dispute over payments from Armani group’s subsidiaries abroad.
And Prada Holdings paid a reported 400 million to 420 million euros to settle taxes in Italy after completing a process of voluntary disclosure in December.