Dolce and Gabbana to go on trial for tax evasion

Loopholes under friendly skies. Photo ET.

Domenico Dolce and Stefano Gabbana saved $540 million in taxes by creating a Luxembourg company in 2004.

Like all governments that are spending like drunken sailors, the Italian government needs every dime it can put its hands on. Therefore owning a Luxembourg, Swiss or other company looks suspicious to both men's tax man.

So it becomes that question, that is often answered with a joke: what is the difference between tax avoidance and tax evasion? Answer: five years in prison.

For all those jurisdictions that occasionally or permanently are branded a tax havens, it is an ongoing concern to stay on the good side of that equation, which is to be on the tax avoidance side. Most governments won't like it, but it can be enshrined in international law as for instance in double taxation agreements. The only remaining problem is that compliance with any international standard in that matter is a moving target that changes as governments and the need for more tax money changes.