Luxury conglomerate Kering has been accused of making offshore payments to certain managers through subsidiaries in Luxembourg, according to French newspaper Le Monde. This is part of the wider OpenLux investigation into the fiscal system of the Grand Duchy. Kering, which owns prestigious brands such as Gucci and Balenciaga, allegedly used an “offshore payment system” to pay millions of euros in salaries to managers via a Luxembourg-based company called Castera.

This is not the first time Kering’s offshore payment practices have faced scrutiny. In 2018, it was revealed that part of the salary of Gucci CEO Marco Bizzarri was paid through the same Luxembourg company, enabling the company to save on social contributions in Italy. Kering disclosed to Le Monde that several other managers from its luxury brands had also been paid by Castera, despite never visiting Luxembourg. In total, Castera paid out 78 million euros in salaries to undisclosed recipients in 2018, paying under 1% in social contributions instead of the 10% that would have been required in France.

Kering’s CEO, François-Henri Pinault, and his deputy, Jean-François Palus, have been cleared by the company of involvement in these offshore payments. Kering argues that it is normal for an international company with operations in over 60 countries to have subsidiaries in Luxembourg, and that the operations of these subsidiaries are legal and legitimate.

Le Monde’s report reveals that Kering stopped using the offshore payment system in March 2019, shifting its assets from Luxembourg to the Netherlands, which is also considered a tax haven. The move followed Kering being fined a record 1.25 billion euros for tax evasion in Italy in 2019. Furthermore, Kering is currently under investigation by French prosecutors for alleged aggravated tax evasion.

In addition to these issues, the French tax office is said to be seeking 150 million euros in tax adjustments from Kering’s French subsidiary, Yves Saint Laurent. However, due to fiscal confidentiality, the tax authorities have not confirmed or denied these figures.

The investigation by Le Monde sheds light on the complex tax structures employed by luxury conglomerates like Kering, raising questions about their commitment to ethical and transparent business practices. This revelation comes at a time when multinational companies are facing increased scrutiny over tax evasion and the use of offshore tax havens. The outcome of the ongoing investigations will determine the legal and financial consequences for Kering, and could have broader implications for the entire luxury industry.

For more information on tax evasion in the luxury industry and its consequences, check out the following links:

1. Financial Times – “Luxury brands finally smell the coffee and tackle their tax tactics”
2. The Guardian – “OpenLux investigation lifts lid on widespread abuse of tax havens”