• 07Jan

    Tax In The Spotlight

    Tax has always been a newsworthy subject, but over the past decade it has really been under the spotlight. Discussions regarding tax and planning can often lead to controversy. This has been seen lately with the arguments surrounding Starbucks and the amount of tax a multi-national business of its size actually pays in the UK. The public are generally angry about the so called rich who pay small taxes. But is this fair? The media reports often do not go into enough depth and they can sometimes sensationalise a serious issue when in reality, there is often a bigger story. 

    It is often the case that people will take headlines in newspapers at face value, without getting the to the core heart of the story. The problem with this is that where a subject as complex as tax is concerned, people have a perception of something without knowing the true facts.

    Take for example the headlines regarding Starbucks and the perceived small amount of tax the company pays in the UK. Taken at face value, this has provoked an outcry from the British public, who are threatening to boycott their coffee shops.  However, there is much more to consider in this.

    Firstly, in the main, Starbucks is in a franchise arrangement. This means that people will set up a shop or a chain in their own business. They then pay Starbucks a fee to use the name, produce and so on. As such, each Starbucks shop is ran by an individual business owner, who will pay all of the necessary taxes, including PAYE, VAT and Corporation Tax on their profits.

    By boycotting the stores, the effect will not be felt by Starbucks as a brand, but by the individual franchisee who are trying to run their businesses as well as possible.

    Another myth surrounds tax for non-UK domiciled individuals.  A number of years ago, much was made about Phillip Green, the owner of Arcadia Group, sheltering personal assets in Monaco. This caused so much of an outcry that in 2007 the rules regarding the taxation of non-UK domiciled individuals was changed. In order to benefit from the status, a payment of £30,000 per annum became payable.

    However, again the bigger picture was not considered. The tax savings for one family having non-UK domiciled status should have been balanced against the economic need for having such an entrepreneur setting up businesses in the UK. Consider the number of Arcadia Group stores across the UK which employ thousands of staff and pay considerable amounts in corporation tax, VAT and PAYE.

    The lesson to be learned with tax articles in the national press is simple. Read between the lines and consider the wider impact.

    Article written by Caroline Taylor, International Tax specialist.