1.25-bln-euro tax settlement with Gucci largest ever in Italy

2019-05-15 00:10

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ROME, May 14 (Xinhua) -- A mammoth tax settlement involving one of Italy's most iconic fashion brands could be just the first as Italian tax officials switch their sights from Internet giants to more traditional companies.

Italian authorities and Kering, the French luxury group, both confirmed last week that the company will pay 1.25 billion euros (1.40 billion U.S. dollars) in a record tax settlement that focused on the activities of its fashion brand Gucci. The sum is the largest settlement ever paid by a single company to Italian tax officials.

The settlement is a blow to Kering's image as a company on the vanguard of environmental, social, governance, and cultural issues.

But analysts said it is also a sign of the times for multinational companies based in Italy.

Since 2015, the Italian tax authority has collected at least 1.4 billion euros (1.6 billion U.S. dollars) in tax settlements from Internet giants including Amazon, Apple, Facebook, Google, and Microsoft. At the heart of those settlements was the question of how to determine where money earned by those companies should be taxed.

The settlement over Gucci nearly matched those settlements in a single deal that, according to Antonio Di Tanno, a professor of tax law at Bocconi University in Milan and partner with the studio Di Tanno e Associati, is less complicated than those involving the Internet companies.

"This agreement is much bigger than the ones involving the Internet companies because those companies were taxed only on what was determined to be a company's income in Italy," Di Tanno told Xinhua. "With Gucci, worldwide operations were taxed and that was because it's a company with an operational base in Italy."

Italian authorities said Gucci evaded a tax bill of more than 1 billion euros (1.12 billion U.S. dollars) between 2011 and 2017. The investigation has been in the works since at least 2016, including a simultaneous 2017 raid of Gucci's offices in Florence and Milan. The accusation is that Gucci illegally booked its sales through the Swiss offices of another Kering subsidiary, Luxury Good International.

The final amount of the tax bill was for just under 900 million euros (1 billion U.S. dollars), with the rest of the settlement covering interest payments and fines.

Di Tanno said the same rules that nailed Gucci could be applied to other companies in similar situations.

According to Antonio Tomassini, a partner and the team leader focusing on European tax disputes at DLA Piper, Gucci's fines would have been lower if it had gone to Italian tax authorities with what is called a "voluntary disclosure" and to ask for guidance over its situation.

"It's always to a company's advantage to recognize a problem rather than have it discovered," Tomassini said in an interview, adding that Gucci likely under-evaluated the risks it faced.

Tomassini said the case involving Gucci and Kering could be part of a trend with tax officials paying more attention to traditional multinational companies.
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