MONEY SHOP
Footwear Today’s financial plumber, footwear retailer David Gummers, looks at the commercial tax system!
T
his month I thought I would do a financial look at the commercial tax system and how it impinges on profitability. For a bit of fun, but with a financial eye! I had a look at what percentage of our turnover goes to
the Government. I am aware that we are paying our employees’ tax so that they do not
have to fill out a tax form. I am sure most small businesses will be very similar. I have included Council Tax, PAYE and Vat. I have ignored corporation tax as this is slightly different. Our marginal rate is 21% of our total gross turnover. Before your eyes glaze over, why do I think this is relevant? It is taking
away from the money that should be spent on shoes. I have always felt that sales tax should be less than
10%.The political parties are saying that the cost of living is rising too fast. If suppliers and retailers did not have to add a fifth to the price the prices would be lower. Let me explain, if sales tax was 10% instead 20%, on a £120 pair of shoes
would cost the customer £
109.This does, of course, depend on the retailer being correct with the customer. I think competition would ensure prices are in a similar ball park. While I understand that employers are responsible for their employees’
tax to ensure that it is collected, I have never understood the tax imposed to employ people. I am sure that this has a detrimental effect on employing people. This again is not a philosophical argument but a financial one. If for every hundred and eleven pounds you pay the staff member only receives £100 it is a huge disincentive to employ extra people. I firmly believe that this is why there has been an increase in part time
staff who are paid below the NI starting point. Zero hours contracts (which I would not use) would not happen if the employers tax did not exist. Turning now to the fundamentals of taxation. The key here is how you
view tax. Do you see it as a legal obligation between the Government and the individual or a moral one. I am not going to answer this on here, as otherwise I will be making it a
political article! What I do believe though is that in return for tax you get a vote. There is a
famous quote “No tax without representation!” I will throw in something a little controversial. I know as individuals we
all have a vote, save for the insane and prisoners! I reckon that every business should be entitled to a vote after all they are paying tax!! This may sound extreme, but if every enterprise that paid tax had a vote it would mean they would be listened to more. I guess the problem would be who in the organisation would have the vote? I would have thought the company secretary, or in larger organisations, the most senior non- executive director? I cannot leave the area of tax without discussing corporation tax, which has been in the headlines over the past year. Again, I can be a little controversial without being political. The first responsibility of a company is to give their customers a good
service and a good product that they want to buy. Their next duty is to their shareholders to give them a fair return on their investment.
34 • FOOTWEAR TODAY • FEBRUARY 2014
Their suppliers and their employees are next on the list, as without paying their suppliers on time and ensuring their employees want to come to work, you do not really have a business. It may be a surprise but it is a legal requirement of a company to maximise its earnings and therefore, technically you could be in trouble with the law if you were to pay too much tax! I will give an example without naming a company. If a shareholder was so inclined where a company has voluntarily paid tax, as happened recently, they would be quite at liberty to challenge the payment in a court of
law.As they are not maximising their earnings. Paying the right amount of tax is the duty of every individual and
company. ALL TAX EVASION IS BOTH MORALLY AND LEGALLY WRONG. It is though incumbent on a financial director to ensure that the company never wastes money, whether it is on excessive expenses that are not wholly, exclusively and necessary for running the business or by paying too much tax. On a lighter note I have yet to meet any company or individual who thinks
they are under-taxed and would be wish that they were paying more. In conclusion, business has a huge burden of taxation in our case 21% of
our turnover (excluding Corporation tax). If a portion of that money was able to be spent on growing the business and who knows even expanding or employing more people, the economy may grow faster. Meaning the Government would get more taxation and have to pay less benefits.
If you would like David to look at your business costs, he promises that if he cannot save you any money you pay him nothing. But for every pound he saves you pay him, 15 pence. If you want to learn more email David on david@fdickinsonfootwear
Website: http://www.fdickinsonfootwear
.co.uk or call 01229 580654
.co.uk/
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