Designers Dolce and Gabbana get nailed as tax cheats

Italy has convicted them of a practice that many Europeans are all too comfortable pursuing.

By Jonathan Berr Jun 20, 2013 12:08PM
Designer Domenico Dolce (left) and Stefano Gabanna on March 18, 2011 (© REX Features)Fashion designers Domenico Dolce and Stefano Gabbana (left and right), who are favorites of celebrities such as Katy Perry and Madonna, were convicted in Italy of tax evasion as the strapped country steps up pressure of people who don't pay their fair share to the government.

According to The Wall Street Journal, prosecutors allege the duo sold two of their company's main brands to Luxembourg-based holding company Gado in 2004 as way to avoid taxes on royalties. Dolce and Gabbana have denied any wrongdoing and have vowed to appeal. They were each sentenced yesterday to one year and eight months in prison, though odds are they'll never see the inside of a jail cell given Italy's convoluted justice system. Also, sentences of less than two years are served under house arrest.

However, one reason Europe's economy is in such a mess is that tax evasion is rampant. The numbers are staggering. In Italy alone, an estimated 285 billion euros ($376 billion) in taxes remain unpaid, equaling 18% of the country's GDP, according to the Economist. The International Monetary Fund warned Greece in May that it had to do more to crack down on its "notorious" tax evasion problem.

And French President Francois Hollande was recently embarrassed by revelations that Jerome Cahuzac, his minister in charge of cracking down on tax cheats, had kept a secret bank account for 20 years to avoid taxes, according to The Guardian.

As for Dolce and Gabbana, they're hardly the only fashionable law breakers.

The Journal pointed out that fashion icon Giorgio Armani was fined $64,000 in 1996 after he admitted to bribing tax authorities in exchange for favorable audits. He also received a nine-month suspended jail sentence.  

In the same industry, but different crime, U.S. shoe designer Steve Madden served 41 months in prison for stock fraud. As the The New York Times noted in February, his downfall will be part of "The Wolf of Wall Street," Martin Scorsese's movie about Wall Street fraud and abuses, scheduled to be released later this summer. Madden is now the creative and design head of Steve Madden (SHOO), the company he founded in 1990.

Jonathan Berr is among the least fashionable people he knows. He doesn't own shares of the listed stocks. Follow him on Twitter @jdberr.

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1Comment
Jun 20, 2013 7:21PM
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It will be nice when the US starts going after liberal celebrity tax cheats as our nation gets more and more in debt.  Then maybe we'll finally stop getting all the garbage liberal viewpoint in our faces in the media.
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