Dolce and Gabbana's Tax Woes

Dolce and Gabbana issued a vehement denial of the allegations, which relate to the 2004 sale of the Dolce & Gabbana and D&G brands to the designers Luxembourg-based holding company Gado Srl. "It's a paradox! Since when does one have to pay taxes on money one never actually collected?" the designers said in a personal statement. "It's an absurd demand based on a completely abstract calculation. This higher taxable sum…is a virtual figure we have never received, the result of a theoretical accounting exercise." According to Dolce and Gabbana, the police claims are based on "the mistaken interpretation" of a regulation, which enables the tax authorities to replace the sum actually paid with a hypothetical market value.

"This claim, far from offering an opinion of the actual facts, describes only the interpretation of a guideline," the statement read. "[The] said allegation constitutes only an invitation to the [tax office] to examine the legal basis of that thesis, and will translate in a payment request for Mr. Dolce and Mr. Gabbana only in case [the] said thesis is proven. If this happened, [the designers] would be facing a blatant violation of the principle of contributory capacity..as the request would then be for taxation of unearned income."

Dolce and Gabbana explained they had "only actually received 360 million euros," or $447.8 million, from the transaction and had declared and paid everything that was owed to the fiscal authorities. They said that if the police’s calculations were correct, their brands would have been worth 1.1 billion euros, or $1.37 billion, in 2004. "We wish!" the designers scoffed. "We will tell the 3,800 employees of the companies, which compose the group, that we have paid all that was due and that we will strenuously defend ourselves to avoid being unjustly forced to pay for something that never existed in the first place."