Dolce & Gabbana acquitted from tax evasion charges

Last June Italian designers Domenico Dolce & Stefano Gabbana were found guilty of tax evasion and sentenced to nearly two years in prison. This week, however, a Milan general prosecutor dismissed the case as "groundless" and acquitted the charges, citing common sense as a

reason for the change of heart.

There was outrage in the fashion community when Dolce & Gabbana, who along with their accountant Luciano Patelli, were sentenced for omitted tax declaration. Dolce’s brother Alfonso, general director Cristiana Ruella and finance director Giuseppe Minoni were sentenced to one year and four months in jail plus legal expenses.

Company sale in 2008 prompted enquiry

Italy's police force Guardia di Finanza began investigating the fashion duo in 2008 with alleged tax evasion related to the 2004 sale of the Dolce & Gabbana and D&G brands to the designers’ Luxembourg-based holding company, Gado Srl. The Italian tax police reportedly consider Gado essentially a legal entity used to avoid higher corporate taxes in Italy.

In the new ruling, the judge said it was “anomalous and a dangerous situation to have the designers physically own the brands,” which justified a restructuring. “As per the Cassazione (Italy’s equivalent of the Supreme Court) and the European Community, there is no regulation that forbids such a restructuring, nor the choice of a country, according to the free circulation of capitals in the market. These are sacred principles,” he said.

The defendants were also charged with paying the Revenue Agency a provisional fine of 500,000 euros. The plaintiff solicitor Gabriella Valadia at the end of May asked for a provisional fine of 10 million euros citing damages to the image of the Revenue Service. Valadia on Tuesday asked for a confirmation of the verdict. The court’s fine is separate from one imposed by the Revenue Agency of more than 400 million euros at the end of March last year.

Dolce & Gabbana have always denied all charges, were acquitted on the second count they were originally charged with, which regarded the valuation of the company and the tax rate paid.

Image: Dolce & Gabbana