Italian designers Dolce & Gabbana lost the appeal of their conviction for tax evasion. Their jail sentences were suspended. Apparently they still have to pay 670,000 euros apiece in taxes and penalties.
That’s not much considering they evaded tax on 1.37 billion euros.
Italian corporate taxes are among the highest in Europe. In that kind of environment, it pays companies to look for innovative tax savings devices. These two yo-yos probably thought they were getting on the Apple gravy train, or the Google gravy train or the Caterpillar gravy train, but they missed the target. What Apple, Google & Caterpillar did was completely legal. (Find the Apple Tax Strategy on our web site.) What these two did was apparently not legal. At least that’s the consensus of two Italian courts. That may be due to Italian tax law, but in any event, regardless of the actual facts, it’s entirely due to preparer incompetence. No competent tax preparer would knowingly violate tax law. And in this case, after two trials, it’s pretty obvious that tax law was violated. Sorry Herbie.
One of the articles linked to below says they were “avoiding payments” in Italy. Apparently they didn’t cross all the T’s and dot all the I’s. In addition, this apparently was widespread among all Italian designers. Both Giorgio Armani and Prada have both come forward forward since the original case and paid hundreds of million of euros in more tax to stave off prosecution. Apparently the entire Italian design industry is using the same do-do bird tax preparation firm.
Some words of advice for adventurous taxpayers or tax preparers. Never take a novel approach to established tax law. This is not unheard of, even the Big 4 have been guilty of this, but it’s completely stupid. You know you’ll get hammered as soon as it comes to their attention. There are enough legal tax savings devices and tax preferences buried in the tax code that only lazy and incompetent tax preparers would ever try a novel approach.
We have a national reputation for tax strategy and we never go anywhere near the grey area, basing everything we do on established tax law. That still leaves tons of room to maneuver. It doesn’t mean we won’t have to explain the law to the IRS, or that we won’t get in a knock down drag out fight with them. But we will always have a solid defense. None of our clients will ever go to jail because of something we did, nor will we ever be censored.
We’re in this for the long haul. Not for a quick splash.