After Dolce & Gabbana’s fine of 343.3 million euros (439.70 million US dollars) for tax evasion, in January, in was Prada’s, famous Italian maison de haute-couture, turn to be under investigation on charges of tax evasion.
Prada under investigation
At the end of 2013, a number of important members of the luxury goods sector found themselves under the scrutiny of Italian tax authorities which ultimately ended with a large fine and criminal charges. After Apple and other fashion designers such as Bulgari and Dolce & Gabbana, it is Prada’s turn to face the music.
Founded in 1913, the brand’s growth is guaranteed by its chairman Miuccia Prada and her husband Patrizio Bertelli, CEO and majority shareholder of the company.
The couple was accused of evading tax authorities by the use of a series of transfers out of the country. Indeed, Prada used one of its subsidiaries, Prada Holding, located in Netherlands and Luxembourg to lessen its taxes. Prada suffered a major loss as a result of the tax authority’s intervention which pushed them to put an end to the company’s financial irregularities.
Prada against the Italian tax authorities
For a decade, Prada’s directors have been cleaning up the group’s financial situation as was agreed with the Italian tax authorities.
Two years after its introduction in the Hong Kong stock exchange, Prada agreed to relocate the funds of its subsidiary Prada Holding in Netherlands and Luxembourg to Italy. This decision was explained by Prada as a strategic choice in line with its desire to invest in Italy.
After negotiations, Prada settled the matter with the tax authorities by paying the backdated taxes. In total, 420 million euros was paid to the authorities. But despite stabilising its situation, the house remained under investigation.
Nonetheless, the Italian tax government declared that all the money due had been paid, including interests and fines.
Prada’s strategy did not prevent further investigations in its finance, however it did reduce by one third the criminal charges that resulted from it.