Dolce & Gabbana May Go to Prison for Billion-Dollar Tax Fraud

Fashion designers Domenico Dolce and Stefano Gabbana have been under investigation in Italy for tax evasion for some time, but now the ongoing scandal —they duo are accused of selling their company to avoid taxes—may lead to fraud charges.

The inquiry was begun by the Guardia di Finanza, the Italian police force specialized in fiscal crimes, which is affiliated with the finance ministry. The unit investigated the 2004 sale of the Dolce & Gabbana and D&G brands to Gado, a holding company based in Luxembourg, which was in turn owned by a company that belonged to the group headed by the designers.

Prosecutors contend that the Italian revenue service was duped out of taxes on the sale of the brands, which they claim were sold well below market value, and on the income from royalties, which were taxed in Luxembourg at a much lower rate than they would have been in Italy. The brands were sold for €360 million, or $508 million - an amount that investigators say was just under a third of their actual value, according to their own calculations.

An Italian judge will decide tomorrow if they will face charges for not paying any taxes on what the government calculates to be about $1 billion in income. If charged and convicted, they could each face up to five years in prison. There is nothing glamorous about prison, kids. Looks like orange jumpsuits are going to be trend for Spring/Summer 2012.

[Image via Getty]