Luxury conglomerate Kering, renowned for its ownership of iconic fashion brands such as Gucci, Balenciaga, and Saint Laurent, has found itself embroiled in controversy over its alleged use of offshore payments to compensate certain managers. A recent report by Le Monde shed light on Kering’s utilization of an “offshore payment system” through a Luxembourg-based entity called Castera to disburse millions of euros in salaries to undisclosed recipients.
The investigation, part of the broader OpenLux probe into Luxembourg’s financial system, uncovered how Kering leveraged the offshore payment method to minimize social contributions in countries like Italy. In 2018, the company reportedly channeled 78 million euros in payments through Castera, raising concerns about potential tax avoidance practices. Kering acknowledged that managers from its esteemed fashion labels were indeed remunerated through this scheme, clarifying that top executives like CEO François-Henri Pinault and Jean-François Palus were not implicated.
Despite defending its use of Luxembourg subsidiaries as standard practice for multinational corporations with global operations, Kering terminated its offshore payment system in March 2019. Instead, the company relocated assets to the Netherlands, a jurisdiction known for its tax benefits and limited financial disclosures. This decision followed Kering’s hefty 1.25 billion euro fine for tax evasion in Italy in 2019, prompting French authorities to launch an investigation into alleged aggravated tax evasion.
The French tax authorities have reportedly requested a 150 million euro tax adjustment from Kering’s French arm, Yves Saint Laurent. However, due to fiscal confidentiality regulations, the precise details of the case remain undisclosed. Facing persistent scrutiny regarding its financial dealings, Kering confronts ongoing challenges to its esteemed reputation as a leading player in the luxury industry, grappling with accusations of offshore payments and tax evasion.
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For additional information on Kering’s corporate governance and compliance practices, visit the official website.
