Luxury Fashion Giant Agrees to Pay Over Alleged Tax Evasion Claims

  • Kering to pay €1.25bn in Italian tax settlement dispute
  • Investigation began in November 2017 over alleged tax evasion
  • Swiss prosecutors opened an investigation in March last year
  • Settlement acknowledges existence of a permanent establishment in Italy from 2011-2017
  • Additional tax charge of €600m and outflow of €1.25bn in cash flow statement

Luxury fashion giant Kerring has agreed to pay a total of €1.25bn (£1.07bn) to the Italian Revenue Agency relating to claims over alleged tax evasion, in relation to its Swiss subsidiary Luxury Goods International (LGI). It comes after Swiss prosecutors opened an investigation into luxury fashion group in March last year, following a request for assistance from Italian authorities. According to reports, an Italian inquiry which began in November 2017 looked into whether profits Kerring made on Gucci sales in Italy had actually been declared in Switzerland, where tax laws are more favorable. However, in a statement to Reuters on 16 March 2018, Kering said it had complied with Swiss tax laws and that its distribution center in Switzerland exercised “tangible business activities”. The settlement, which it said concluded after “in-depth” analysis and with a “collaborative spirit”, acknowledged that the claims raised during the tax audit regard both the existence of a permanent establishment in Italy in the period 2011-2017, with the associated profits and the transfer prices applied by LGI in the same period with its related party Guccio Gucci. Based on an initial estimate, the retailer said the agreement should impact Kering’s consolidated financial statements in 2019 with an additional tax charge of around €600m (£518m) in the income statement, and an outflow of €1.25bn (£1.07bn) in the cash flow statement.

Factuality Level: 8
Factuality Justification: The article provides accurate information about Kering’s agreement to pay a large sum to the Italian Revenue Agency due to tax evasion claims and includes relevant details about the investigation and settlement. It also explains the impact on Kering’s financial statements. However, it could provide more context about the specific allegations and findings of the investigation.
Noise Level: 3
Noise Justification: The article provides relevant information about Kering’s tax evasion case and settlement with Italian Revenue Agency, but it could have included more details on the specific actions taken by Kering to address the issue and any changes made in their business practices to prevent future incidents.
Financial Relevance: Yes
Financial Markets Impacted: Kering’s stock price and luxury fashion industry
Financial Rating Justification: The article discusses a significant financial settlement between Kering and the Italian Revenue Agency, which will impact Kering’s consolidated financial statements and cash flow. This has implications for the company’s stock price and the luxury fashion industry as a whole.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: No extreme event mentioned in the article

Reported publicly: www.retailsector.co.uk