Tag: Luxembourg

Yuan clearing banks in Luxembourg, Paris

In its continued push to make the yuan a global currency, China’s central bank said Sunday it plans to designate clearing banks for its currency in Paris and Luxembourg, as the two financial centers battle with London to become the leading European offshore yuan-trading city.

The People’s Bank of China announced the move in two separate statements Sunday. It didn’t say when it would designate the clearing banks.

The French and Luxembourg central banks said Sunday they had signed agreements with PBOC allowing for greater cooperation in the oversight of their domestic yuan market.

The weekend moves are the latest salvos in the race to win a major share of business in cross-border transactions in the Chinese currency. Singapore and Sydney are also vying for a significant share of the global yuan market, which is expected to expand rapidly along with China’s fast-growing economy.

On June 18, the PBOC appointed China Construction Bank Co., one of the country’s top-four state-owned banks, to clear yuan-related transactions in London. It became the first yuan clearing bank in a European country.

Opening a clearing bank is a critical step in developing an offshore yuan-based business. The designated banks will be able to supply yuan liquidity in case of a shortage by directly accessing China’s onshore currency market.

The Chinese central bank said that setting up the clearing banks will benefit Chinese, French and Luxembourg ” businesses and financial institutions in using the renminbi [yuan] for cross-border transactions and in further promoting trade and investment.”

French authorities have openly pushed for Paris to become a center for yuan transactions.

In March, China also granted 80 billion yuan ($12.9 billion) of quotas to French financial institutions that enable direct investment in the Chinese domestic financial market.

The Bank of France said Sunday the latest decisions by the PBOC “confirm the prominent role of the French market place” in cross-border use of the currency.

Luxembourg, home to a powerful asset-management industry, has built strong ties with Chinese investors in recent years and currently hosts the European headquarters of China’s three leading banks.

Last year, former Luxembourg Finance Minister Luc Frieden cited figures showing that the country was the leading center for yuan business in the euro zone, with some 40 billion yuan in deposits, 62 billion yuan in loans from Luxembourg banks and 220 billion yuan under management in the fund industry.

For China, the move to allow the yuan to be used more freely abroad aims to boost demand for the currency and reduce the amount of dollars entering the country. China still maintains a tight grip on the yuan’s value, with its trading strictly controlled in the mainland market.

Source: Nasdaq

Dolce and Gabbana convicted of tax evasion

Domenico Dolce, left, and Stefano Gabbana, in the company of some fashion clients
Domenico Dolce, left, and Stefano Gabbana, in the company of some fashion clients

An Italian court on Wednesday sentenced Italian fashion designers Domenico Dolce and Stefano Gabbana to one year and eight months in prison for tax evasion.

The pair’s lawyer, Massimo Dinoia, said they planned to appeal, adding that the case is “groundless.” The designers, known for their sexy styles favored by celebrities such as Madonna, Naomi Campbell and Katy Perry, have denied the charges.

The case dates back to 2004, when two of the company’s main brands were sold to Luxembourg-based holding company Gado.
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A court in Milan has convicted fashion designers Domenico Dolce and Stefano Gabbana of tax evasion. Christina Binkley reports.

Prosecutors alleged that the sale was made to avoid declaring taxes on royalties deriving from the two brands’ activities.

Under Italian law, the pair wouldn’t go to prison because sentences of less than three years are served with house arrest or community service. Moreover, the designers have the right to appeal the verdict twice, and Italian courts often take years to reach a final decision.

Public prosecutor Laura Pedio dubbed the operation as a “sophisticated tax fraud” and originally asked for a two-year jail term for the duo. If the conviction is upheld, the pair would also need to pay a fine to Italy’s tax agency for €500,000.

Over the last five years, Italian tax authorities have ratcheted up pressure on tax evasion in an effort to claw back an estimated €120 billion a year in unpaid taxes, cracking down in particular on the use by Italian companies of offshore centers to avoid taxes.

According to Italian tax authorities, the country lost about €17 billion in undeclared or under-declared income to offshore centers last year, compared with €11 billion for 2011, with Luxembourg the leading country used by Italian individuals and companies seeking to hide money abroad. Corporate tax rates in Luxembourg can be close to zero, while they are about 28% in Italy.

While Dolce & Gabbana has emerged as one of the most high-profile cases pursued by Italian tax authorities, Italian authorities have gone after other fashion groups in the past. In 1996, Giorgio Armani received a nine-month suspended sentence and was fined $64,000 for paying off tax authorities in exchange for favorable audits. Mr. Armani admitted to having paid the bribes.

Late last year, prosecutors launched an investigation into whether the Marzotto family, a wealthy textile dynasty, and four managers dodged 65 million euros in Italian income taxes when it sold fashion house Valentino through a Luxembourg holding company in 2007.

Earlier this year, the family paid the taxes that the state claimed it owed, but will face a criminal trial later this year.

The family and managers have denied all charges. – Wall Street Journal