Dolce and Gabbana found guilty of tax evasion
The Guardian reported that fashion designers Domenico Dolce and Stefano Gabbana - the founders of the Dolce & Gabbana clothes brand - were given a suspended prison sentence of a year and eight months on 18th June 2013 for what prosecutors claimed was a sophisticated system of evading tax on income of around €1bn (£850m).
A court in Milan ruled that the pair had sold their world-famous brands to a Luxembourg-based holding company in 2004 to avoid declaring tax on royalties. Dolce and Gabbana were also slapped with a suspended fine of €500,000 owed to Italy's national tax agency. The duo have always denied wrongdoing and their lawyers said that they would appeal.
Under Italian law, a sentence of this kind is suspended until the conviction is made definitive. Given the length of the appeals process, it is unlikely Dolce or Gabbana will ever see the inside of a jail cell. A separate charge of misrepresenting income had already passed the statue of limitations.
In her closing speech to the court on Wednesday, prosecutor Laura Pedio said there was "rock-solid proof" that the designers had carried out a sophisticated system of tax evasion, the Ansa news agency reported.
Her colleague Gaetano Ruta said the holding company, Gado – a combination of the two men's surnames – was an artificial construction "whose aim was to get a tax advantage". The prosecutors had asked the court to hand down a sentence of two-and-a-half years, but the judge decided to be more lenient.
The conviction marks the latest point in a long and winding path that began in Luxembourg in 2004 and 2005, when Dolce and Gabbana transferred control of their two brands to Gado – a move prosecutors argued was made deliberately in order to evade tax.
Massimo Dinoia, the lawyer for Dolce and Gabbana, had declared the case to be "the paradox of paradoxes" because the amount they were charged with evading "exceeded the income by a large margin".
A case charging the pair with tax fraud and tax evasion was thrown out by a judge two years ago, but Italy's supreme court subsequently ruled in November that the men could be prosecuted, if only for the latter charge.
See our product guide to designer clothes to see how Dolce & Gabbana rates against other designer clothes companies.
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