MILAN — Fiscal elusion, on its own, has no penal relevance.
That was the core reasoning behind the Italian Supreme Court’s decision to clear Domenico Dolce and Stefano Gabbana of charges of tax evasion. Italy’s highest court published the motivations behind its verdict one year after the last hearing in the designers’ tax trial.
The Supreme Court said the “fiscal advantage is not illegal only because the entrepreneur exploits the opportunities offered by the market or by a more convenient fiscal legislature.” The fiscal advantage is illegal only if it “is obtained through situations that are not consistent with reality or are a pure ploy.”
“The exclusive research of a fiscal gain,” said the court, even if it can be qualified as an elusive operation, “is not in itself enough to prove an evasion, especially when the economic operation is real and effective.”
Addressing the omitted declaration of taxes allegedly committed by the designers and their fellow defendants, the Supreme Court highlighted “the mistake” of the judges at the lower levels who believed the prosecution’s accusations. The designers were charged with alleged tax evasion totaling 416 million euros, or $533.2 million, 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 considered Gado essentially a legal entity used to avoid higher corporate taxes in Italy.
The investigation began in 2008 and was initiated by the Guardia di Finanza, an Italian police force under the authority of the national minister of economy and finance. The Supreme Court underscored that “apparently located” and “actually managed” are terms that “conditioned” the entire trial, “examined without taking into consideration the concurring and uncontested existence of robust extra fiscal reasons that inspired the reorganization of the group Dolce & Gabbana, which unhinge the consistency of the accusations.”
The judges at the lower levels “strayed” from the investigations, almost “unexplored and contradictory,” about the reality of the Luxembourg headquarters, and “the effectiveness of the activities taking place there, and the reasons” behind the choice of that country as the location for Gado.
The tax agency had also asked to be compensated for damages in the amount of 500,000 euros, or $550,000 at current exchange, but the Supreme Court dismissed that claim as well, saying the damages “cannot be qualified as economic and even less so as moral.”
The Supreme Court’s decision at the end of October 2014 came after seven years of legal battles involving Dolce and Gabbana that included acquittal on charges of fraud from a judge at the preliminary hearing level in 2011, a reversal of that decision at a higher court, new charges of tax evasion and finally two trials at lower courts before the case was finally referred to the Supreme Court.
The sentence also cleared the other defendants, including general director Cristiana Ruella, finance director Giuseppe Minoni and accountant Luciano Patelli, as there were no grounds for a case. The only defendant who could have still seen a trial was Domenico Dolce’s brother, Alfonso Dolce, who is the legal representative of the company, but the statute of limitations in that case expires in November.