Net-a-Porter accused of not paying enough tax

Tuesday, 15 July 2014
Luxury online retailer Net-a-Porter has become the latest company to be accused of tax dodging with Channel 4 News reporting that the e-tailer paid a fraction of the tax you would expect it to.Channel 4 News claimed that shopping firm raked in sales of 435 million pounds in the year to March 2013, but posted a loss of 24.7 million pounds, which allowed the e-tailer to pay less tax. The report stated that Net-a-Porter used “clever planning” and legit methods to pay a fraction of its tax bill by transforming profits into a loss.

The report claimed that the loss, in part, was created by the way it chooses to pay its senior executives with its share-based payment scheme that has been in effect since Compagnie Financière Richemont took control of the online luxury retailer in 2010. It is this remuneration for employees that creates losses on the balance sheet that allows the company to reduce the amount of tax it is liable for.

“In this particular company's case, we don't know where it's making its profits, we don't know where it's paying its tax,” Tax Research UK's Richard Murphy told Channel 4. "We don't actually even know it's paying its tax because there is no cash flow statement in these accounts because there is a Swiss parent company."

Channel 4 News criticises Net-a-Porter’s tax practices

Channel 4 emphasised that Net-a-Porter’s accounting practices are entirely legal, and no laws have been broken, but asked whether it is too easy for companies to avoid tax and claims that Her Majesty’s Revenue and Customs (HMRC) aren’t doing enough to crack down on certain corporate tax practices.

“The Net-a-Porter Group Ltd notes the media comment regarding its UK tax status. Net-a-porter is a successful UK-based global business that employs over 1,500 people in the UK and a further 800 worldwide, and contributes significantly to the UK economy,” Net-a-Porter Group Chief Executive Officer, Mark Sebba, told WWD in response to the allegations.

Sebba added: “The company continues to invest significant sums in expansion, development and innovation. Net-a-porter has every intention of maintaining its UK tax domicile for its UK operations, and paying all taxes due in line with the law, best practice and HMRC’s policies. Since its foundation in 2000, Net-a-porter has never sought to avoid paying tax in the jurisdictions in which it operates.”

Net-a-Porter is the latest big company to have its tax practices examined, Google, Amazon and Starbucks have also been accused of not paying enough tax.

Image: Net-a-Porter.com

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