In the third part of our article with Lush’s Kim Coles we tackle the question of fair tax structures.
Lush is also the first multinational UK high street retailer to be awarded the Fair Tax Mark which as the name suggests is given to companies and organisations that pay their fair share of tax.
According to the Fair Tax website it conveys the message to customers that the company holding the mark is “open and transparent about its tax affairs and seeks to pay the right amount of corporation tax at the right time in the right place”.
Lush has set out its ethical tax policy on its website.
“The idea that tax is the common enemy of all people has led some companies to think that it is somehow acceptable to manipulate their business structures and accounting practices to avoid paying their contribution. But this attitude is not just self-serving, it is also short sighted, because those taxes are what will keep the infrastructure of our society in place and deliver healthy customers to our doors on well maintained, clean, lit streets,” it reads.
“We will take advantage of legitimate business tax structures and benefits available in each country – but we will never search for loopholes or devise schemes that stretch the rules beyond their obvious intended purpose.”
Included in its tax statement is the pledge to “pay our taxes on time and agree payment plans with local tax authorities in advance where this may not be possible, for example where seasonal cash flow constraints are anticipated” and to have a “clear Transfer Pricing Policy to ensure that the way we charge between our Inventing, Manufacturing and Retail companies is transparent, arm’s length and properly documented, and that it complies with local laws”.
It gives guidance to its local finance teams on two key tax areas – transparent disclosure and clear responsibility.
Regarding disclosure Lush says it is committed to moving towards reporting country-by-country results in its annual report and to clearly explain the intercompany transactions fundamental to its global operations.
Responsibility for all tax reporting and adherence to the Lush Ethical Tax Policy sits with the local finance directors in each country. The local FDs and controllers are responsible for understanding the local tax legislation and procedures for the countries in which they operate and for keeping up to date with and complying with all applicable laws, rules and disclosure requirements.
“It hasn’t been a challenge to implement this at all,” says Coles. “Finance professionals don’t like complicated tax structures and are crying out for these policies. They are glad that we have them and know exactly what they can focus on. It simplifies tax for them and gives them clear numbers that they can explain to the wider business. I believe it is a cultural shift and more businesses are moving towards this.”