Domenico Dolce and Stefano Gabbana were sentenced to 20 months in prison for tax evasion by an Italian court. 20 months in the cabana is no dolce vita. The good news: there will be appeals, and even if that fails, it will be mostly a sentence of “house arrest”. However it has been a nightmare for both designers.
It is also a dubious public relations event for Luxembourg. Indeed the tax evasion, or was it “optimization”, occurred through a Luxembourg structure, “Gado” holding the company’s brands. In the present times of efforts to dismantle tax havens, it is just a prominent example for those who say: see! At first sight you may also wonder, who advised those gentleman? Obviously, they didn’t set up the Luxembourg structure by themselves. In which case all those consultants have to worry: how to maintain trust in their expertise? Or, do they have any kind of liability?
And very bluntly comes up the question: are those financial engineering adventures still worth the risks, mostly in view of a universal FATCA, that is bound to be enforced in a matter of years.
There goes the possibility for companies like Dolce and Gabbana to be creative outside fashion. There goes a huge market for the Big Four and other local players. Five years left, but financial engineering and tax rulings clients will desert before that. Proof are the Amazon hearings in the UK and the Apple hearings in the US. And there goes the windfall for tax havens, that will have to struggle to replace an easy source of budgetary revenue.
