Have you done your taxes yet? Or do you, like many people (and um, us), jumble all that “Important: Tax Documents Enclosed” mail into a dusty pile until you get tired of your dad bugging you about it? Or, better yet, do you just decide to recycle that mail as cocktail coasters and then toss it gleefully in the trash, since the IRS must have much more important things to do than chase after your piddling salary?
Well, if you fall into the latter camp, you are in very fashionable company, save one detail: Domenico Dolce and Stefano Gabbana’s salaries are not quite so piddling, and they have been under investigation since 2008 for tax fraud (this is Italy, after all; these things take awhile) and were indicted in November for failing to pay taxes on more than $1 billion in income. It appears now that they may stand trial for criminal charges.
Tax-evasion cases for designers take place all the time, because paperwork is a bother and decidedly unglamorous. It's particularly rampant in Italy, the Times notes, "where tax evasion is regarded by many people, including some in the fashion world, as a national sport." However, this case is a little more serious than most because it appears that Dolce and Gabbana went to great lengths to defraud the tax system on purpose rather than simply being too caught up in their fabulousness to check their numbers. The Times reports:
What sets this case apart is that the designers stand accused of fraud. Papers filed by prosecutors in a Milan court allege a “criminal design” to defraud the state. Prosecutors contend that the Italian revenue service was duped out of taxes on the sale of the brands, which they claim were sold well below market value, and on the income from royalties, which were taxed in Luxembourg at a much lower rate than they would have been in Italy. The brands were sold for €360 million, or $508 million — an amount that investigators say was just under a third of their actual value, according to their own calculations.
So basically, Dolce and Gabbana have been accused of setting up a "dummy company" in Luxembourg to dodge taxes, and then not declaring the income they made from that company. Both designers have been charged, as well as three company executives and their tax advisor.
Authorities will determine this Friday if a criminal trial will take place. If it does, the designers could face a maximum sentence of five to seven years in prison.