Italian prosecutors have accused the fashion house Dolce and Gabbana of failing to declare revenues of around 840 million euros (1.2 billion dollars), Italy's main business daily reported on Saturday.
Investigators have closed their inquiry against founders Domenico Dolce and Stefano Gabbana, as well as five other people, but no formal charges have yet been presented, Il Sole 24 Ore said, citing prosecutors in Milan.
The allegation is that Dolce and Gabbana created a company in Luxembourg in 2004 and 2005 which was given control of the group's brands, thereby avoiding Italian taxes. The Luxembourg company, Gado, was in fact run from Italy.
The unpaid taxes amount to 420 million euros, Il Messaggero daily reported.
Italy has been cracking down on widespread tax evasion in recent months in an effort to raise government revenues following the global economic crisis.
Dolce and Gabbana was set up in 1985 and employs more than 3,000 people, with a network of 116 stores and 17 factory outlets in 2009, the group's website said.