British model Naomi Campbell (C) poses with Italian designers Domenico Dolce (R) and Stefano Gabbana during a party marking the 25th anniversary of her career in downtown Shanghai October 28, 2010. REUTERS/Carlos Barria (CHINA - Tags: FASHION)

Seems that Dolce & Gabbana’s 1B tax problem didn’t go away. A few months ago it came to light that Italian authorities are not happy that Stefano Gabbana and Domenico Dolce have a Luxembourg-based company (Gado Srl) holding the Dolce & Gabbana brand. What makes them even more unhappy is that in 2004 Stefano Gabbana and Domenico Dolce “sold” the D&G and Dolce & Gabbana brands to their own Luxembourg company (thus transferring their brands’ ownership from Italy to Luxembourg) for a measly $447.8. The Italian tax authorities allege that that number should have been much higher – around $1.37 billion and thus the tax paid on the transaction should have been much higher.

Dolce & Gabbana in response claim that the Italian tax authorities only wish their brand would be worth so much and insist upon their innocence. It seems their options are either to pay a fine of up to $1.3 million or stand trial. If convicted, they could serve as much as a three-year prison sentence.

In Stefano Gabbana and Domenico Dolce’s defense, it seems a lot of Italian brands have been accused of various tax and financial crimes over the recent years. Giorgio Armani, Gianfranco Ferré, Roberto Cavalli, Salvatore Ferragamo and Valentino Garavani all had charges brought against them. Some chose to pay a fine, some chose to go to trial and were acquitted.

So either Italian designers are all corrupt to the core or the Italian tax authorities like to fish for free tax money. I’ll go with option number two.