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Gucci Parent Will Cooperate With French Tax Probe

Following a media report alleging tax-related fraud, luxury titan Kering on Thursday confirmed that French Authorities had opened a probe in February of last year.

“Kering had not previously been informed of this inquiry,” the French company said, adding that the preliminary inquiry was opened by France’s Parquet National Financier, the country’s financial public prosecutor’s office.

In a statement, Kering said that the probe stemmed from legal proceedings initiated in November 2017 involving Swiss subsidiary LGI. That legal matter resulted in a settlement between Gucci and Italian tax authorities in May of last year, with Kering making good on a 1.25 billion-euro payment ($1.4 billion).

“Kering refutes in the strongest possible terms the allegations contained in the press article and forwarded by other media,” it added.

The owner of Balenciaga and Gucci said it “intends to fully cooperate with the inquiry, in complete transparency and serenity.” It also said the company “will continue to communicate diligently and openly about tax litigation.”

A Mediapart report alleges that the Italian tax evasion probe centers on sales tax payments for Gucci products sold in Italy, despite the goods being distributed through the Swiss subsidiary, which has a lower tax rate. The structure allowed Kering to allegedly avoid paying the higher Italian tax rate. Allegedly, the arrangement help the luxury firm skirt 2.5 billion euros ($3.06 billion) in taxes between 2010 and 2017 even though sales had largely been generated in Italy. And the tax savings also included about 180 million euros ($220.5 million) that allegedly were owed to France.