FASHION LAW: NET-A-PORTER IN HOT WATER FOR TAX DODGING
The ever popular and rapidly growing premier online luxury retailer, Net-a-Porter, can now join the ranks of other companies with dodgy tax statuses. The company, most famously known for exclusively supplying the hottest looks of the season to style savvy consumers via e-commerce, is being accused of tax dodging and paying far less in taxes than one would expect.
Britain’s Channel 4 News asserts that the retailer brought in sales totaling $742m (£435m) in the year to March 2013, but posted a loss of $42m (£24.7m), which in turn allowed the company to pay less in taxes. The news report further claims that Net-a-Porter used legitimate and legal methods to pay a fraction of its tax bill that would transform profits into a loss— a cunningly deceptive plan.
While legally the company has done no wrong, the credibility of the company as a whole has been questioned as Channel 4 criticized a share-based payment plan used as remuneration for employees, a plan that has been in place since Compagnie Financière Richemont took over the company back in 2010. So what are the logistics behind the plan that would allow a company to, more or less, cheat on their taxes? The plan, effectively and strategically, creates losses on a balance sheet that can be carried into future years which then in turn reduces the amount of tax for which a company is liable.
In this particular case, tax researchers are at a loss to find exactly where this company is making its profits as there is no way to trace where the company is paying its tax.
As reported in WWD, Net-a-Porter’s CEO, Mark Sebba had nothing but positive reinforcement for the company by stating, “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…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 not alone in being accused of not paying enough tax; other large companies such as Google and Amazon have been disparaged as well.