Fashion designers Dolce and Gabbana have been given 20 month jail terms and heavy fines for tax avoidance by a court in Milan.
The sentences are suspended pending an appeal.
The duo contest the verdict. It is claimed they sold their brand to a holding company in Luxembourg to avoid declaring
taxes on royalties of about one billion euros to Italian authorities.
Public prosecutor Laura Pedio told the court in her closing arguments that the designers were “well aware that they would reap a tax advantage from this transaction.”
Gado is nothing but a shell company that took no administrative or financial decisions, said Pedio. “Gado is a radio relay station,” she said. “The orders originated in Milan, and bounced from Luxembourg back to the Milan offices where the decisions regarding the brands were made.”
Dolce and Gabbana’s three lawyers said in a statement they were “frankly stunned” by the verdict and were “certain that that it will be overturned on appeal.”
The designers still risk a possible tax bill of more than 400 million euros as a result of the case, their lawyers said, which could impact their fashion house.
“We are afraid to even imagine what the social and economic consequences of such a move would be,” said their lawyers.
The designers have always said they are innocent. “Everyone knows that we haven’t done anything,” Gabbana tweeted in June 2012 after the trial was ordered.
Gabbana’s immediate reaction on Wednesday was to tweet a photograph of the branch of a citrus tree, a symbol of Sicily which is the duo’s signature, just seconds after the verdict was announced. A strand #freedolceandgabbana also appeared on Twitter.