Domenico Dolce and Stefano Gabbana, designers of luxury fashion goods brand Dolce & Gabanna, were convicted of tax fraud in Italy Wednesday. They received a reduced sentence of 18 months in jail for avoiding Italian taxes on the equivalent of $1.38 billion.
Italy's appeals court upheld a verdict issued in June against the pair for using a Luxembourg holding company to avoid paying taxes "on royalties of about 1 billion euros," AP reported.
A lawyer for the pair says they are "shocked" and will appeal the decision.
Dolce and Gabbana produce high-end fashion goods. Saks Fifth Avenue shows that heels and purses retail starting around $1,000.
Fashion companies have fallen under the scrutiny of Italy's tax authorities partly due to the fact the sector has performed well during the country's longest recession since World War Two.
"Luxury is one of the few sectors to have done well in recent years," said a partner specialising in tax at Grant Thornton in Milan who declined to be named. "It is easier to go and ask for money where there is money as opposed to going to a troubled sector."
It's good to know that, with the difficult economy the world has faced, there are still sectors that are doing well. Bloomberg values Dolce & Gabbana at $5.3 billion and estimates that Dolce's net worth is around $2.2 billion with Gabbana's at $2.1.