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Kering says its taxes on luxury brands comply with Swiss obligations

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Kering says its taxes on luxury brands comply with Swiss obligations

French luxury apparel retailer Kering SA said its tax payments in Switzerland comply with the country's tax obligations and that its business model is known by French and other tax authorities, after news reports alleged that the company sought to evade taxes, according to a Reuters report March 16.

Kering issued a statement to Reuters in response to allegations made in reports by French news outlet Mediapart and Germany's Der Speigel, claiming Kering saved on taxes on wholesale sales in such cities as Paris, London and Milan, by using a business model that deferred its billings to a Swiss region that enjoys a lower tax rate.

"The group pays its due taxes in Switzerland, in compliance with the law and the fiscal status of the company," Kering told Reuters in a statement. "This business operating model is known by French and other competent tax authorities."

Citing documents from an Italian tax investigation, Mediapart reported that Kering has saved an estimated €2.5 billion since 2002, by avoiding taxes in Italy, France and the U.K, among others.

The news reports from Mediapart and Der Speigel stated that the retailer allegedly paid a lower tax rate of 8% by billing earnings from its businesses in other countries to the Swiss region of Ticino, Reuters reported.

Most of the allegations are focused on Kering's Italian fashion brand Gucci, according to the reports. Prosecutors in Milan are investigating the brand's taxes, and Kering has reportedly been cooperating with the investigation, Reuters reported. The Kering group, which is run by Francois-Henri Pinault, has yet to set aside funds associated with that investigation, according to Reuters.

Kering said its Swiss businesses employ 600 employees, are directly linked to its brands and are an integral part of its billing, supply chain and inventory management, according to the Reuters report.