17 Jun Dolce and Gabbana Caught in a Tax Nightmare
In late 2018, just before the holidays, Domenico Dolce and Stefano Gabbana, the partners behind world-famous luxury fashion brand Dolce & Gabbana, were cleared of tax evasion charges at a fiscal level, four years after they were acquitted at a penal level from charges of fraud.
Their legal troubles began in 2007 when the Italian government began investigations into Dolce & Gabbana after reports surfaced that the partners moved assets to Luxembourg to evade taxes. In their initial findings, investigators found “conduct of abuse with the only goal of obtaining a fiscal advantage.” The investigation covered the time period between 2004 and 2006 when the duo had sold their brand to Luxembourg-based company Gado, suspected of being a shell company, to avoid declaring taxes. Curiously, the name Gado appeared to be a combination of the two designers’ names; the “Ga” coming Gabbana, and the “do” taken from Dolce.
Furthermore, investigators claimed that the companies were sold to the holding company for only a third of its true market value. To the allegations, Gabbana turned to Twitter to express his disappointment in the court’s rejection of their appeal. He said, “To be accused of something untrue is not a beautiful thing. But in the end who cares, we will all finish up six feet under.” And by May 2009, the partners were charged with tax evasion.
Tax Evasion Charges and a Prison Sentence
On November 19th, 2010, a Milan prosecutor asked for the partners to be put on trial for evading taxes on income amounting to more than €1bn. In her closing arguments, public prosecutor Laura Pedio told the court that the partners were “well aware that they would reap a tax advantage from this transaction.”
The partners were initially cleared of the allegations; however, their tax troubles would resurface when Italy’s highest court would overturn the acquittal. And by November 2011, the case would be sent back to trial. When the trial was ordered, Gabbana again appealed to the public, tweeting, “Everyone knows that we haven’t done anything.”
On June 19th, 2013, Domenico Dolce and Stefano Gabbana were found guilty of tax evasion and each received a jail sentence of one year and eight months. The two were quick to appeal the sentence, submitting a 90-page petition to avoid jail time. It wasn’t until April 30th, 2014 that a panel of judges overruled the appeal, deciding that the two should uphold the sentence. However, because the jail sentence falls under the two-year minimum, the two did not serve any actual imprisonment in jail.
The two continued their battle to not only appeal the charges but to clear their name completely.
Dolce & Gabbana appealed to the highest court in Italy. Just six months later, on October 24th, 2014, the Italian Court of Justice would declare Dolce & Gabbana innocent of tax evasion, declaring the prosecution case was “unfounded.” With the conviction annulled and the court decision announced, Gabbana tweeted, “We knew it!!! We are honest people!”
In an official statement, the fashion duo declared, “We have always been honest, and we are extremely proud of this recognition by the Italian court of justice. Viva l’Italia.”