Luxury fashion empire Kering facing 1.4b euro tax claim

6 Mar 2019 , 3:04pm

French luxury goods company Kering is facing an Italian claim for 1.4 billion euros in unpaid taxes in a probe largely centred on Gucci, the company’s star brand and biggest revenue driver.

Police checks

Italian police carried out checks at Gucci’s Florence HQ and its Milan offices in 2017, and the resulting preliminary findings have been handed to Kering. At issue in the Italian case was whether profits Kering made on Gucci sales in Italy had in fact been declared in Switzerland where tax laws are more favourable.

Swiss-based subsidiary

The company's Swiss-based Luxury Goods International (LGI) subsidiary has been under investigation for allegedly aiding tax on earnings generated elsewhere. Some business carried out by Kering employees was billed through the Swiss unit, incurring lower taxes. Kering has said that LGI is a substantial firm in its own right with 600 employees and a business model “known to French and other competent tax authorities”.

Kering denials

In a statement made in late February, Kering said that the Italian tax authorities’ findings for the years 2011-2017 had yet to be finalised by their own enforcement team. Kering said it “challenges the outcome of the audio report” on both grounds and the amount, and added that “it does not have the necessary information” to record a provision against any potential bill for back taxes or penalties. The group has consistently denied avoiding tax, saying its activities were fully compliant with all tax obligations.