Are you paying too much tax?25th January 2018
If I asked you to reduce the costs in your business, where would you start? Would you look at the cost of the people you employ and your suppliers? The rent you’re paying on your premises? Or perhaps your day-to-day expenses, such as subscriptions, office supplies, or your employees’ benefits?
Those are the kind of issues that commonly come up whenever I discuss reducing expenses with our clients. They’re all excellent areas to tackle….
…But I’m always surprised at the enormous expense that is almost never mentioned. In fact, it’s the elephant in the room.
I’m talking about your taxes.
That’s probably a large cost for you. And yet, all too often, companies treat tax as if it were different to every other cost.
They accept their tax bill as uncontestable, a number which is handed down to them from above and which they are powerless to do much about.
At the very most, they allow their accountant to tinker with the details, making minor, obvious adjustments to reduce their tax liability.
(Strangely, some of the CEOs who take this approach are very keen on reducing their personal tax bill……)
But even though we all know that the only certainties in life are death and taxes, that doesn’t mean that we should just sit back and submit…..
Here’s how I think about it. Your company’s taxes are a cost like any other -- and should be proactively managed like any other.
You should be actively working throughout the year to reduce this overhead, just as you seek to minimise what you spend on staff, electricity, stock and so on.
That doesn’t mean, by the way, putting tax considerations above all else. There are companies that take questionable business decisions because of the tax implications. I call this ‘letting the tax tail wag the business dog’.
Taking good business decisions must always come first.
There are two caveats. First of all, I cannot emphasise enough that I’m talking about legal, proper ways to reduce your tax bill – though I would hope that doesn’t need to be clarified!
And second of all, there are ethical considerations here, about whether companies should seek legal ways to reduce tax. I’d prefer not to go into those here – those are for you and your Board to work out.
But if you accept that your company is entitled to – and perhaps even obligated to – legally reduce its tax burden to produce more profit, then you probably need to pay closer attention to the tax implications of your business decisions, and deal with the consequences.
It could make an enormous financial difference to your business.
So what’s the first step?
I’ll address that in my next blog.