Insights on Tax
Why you should focus on paying $1+ million in tax this year…
Now we have your attention… Do you want to know why we believe you should focus on paying more tax? Read on...
Firstly, let's be clear that taxation is a very important source of government income in nearly all developed countries. In fact most governments have become very effective at creating ways to maximise the amount of tax they can demand. It’s almost as if it's a business in its own right…
Traditionally, paying tax and handing over hard earned cash is often met with resentment. And whilst, on the surface at least, this is understandable, we’d like to propose a reframing of the whole topic.
As professional business advisors we believe that a growth focussed approach to business is far more valuable (and healthy) than you pouring energy into just being tax efficient. Why? Because every minute you, the business owner, spend on tax minimisation, is another minute of lost growth opportunity.
Of course, we’re not suggesting for a moment that you shouldn’t care about being tax efficient (and compliant); you should. But we’re saying that it’s not the best use of your expertise or time.
Isn’t it your accountant's job to ‘have your back’ on the subject of tax efficiency?
Assuming you always want your business accounting to be compliant (and you should) then what we’re really talking about is minimising the amount of tax you pay; to be efficient. For most businesses it’s a given that the more profit you make the more tax you have to hand over.
Let’s stay with the profit component of that last statement; that’s the fun part of the story. Sure, you want to hand over as little of your hard earned profit as you can (as tax) but, surely this shouldn’t be allowed to suffocate your growth aspirations?
Now, as is often the case the media has a hand in all this. There have been some very high profile media reports in recent years in relation to the amount of tax some of the largest companies on the planet are paying; that being little to no tax. Companies such as Starbucks in the UK, Amazon, Apple… the list goes on.
But do you think Jeff Bezos or Tim Cook spend their time fretting about or focussing on tax avoidance. Unlikely. They’re too busy growing their organisations and making huge profits. But you can be sure they have an army of very switched on accountants and business advisors behind them. That’s the smart play.
Let’s try something… Imagine you are Bezos or Cook at your weekly management meeting and you say this next sentence out loud to your team.
“Okay. We just got a tax bill and from now on we’ll not focus on growing the business and making more money as we already pay too much tax”.
The media would love it - but you’ll never hear such words come out of those progressive leaders' mouths!
Our point is simply that, like those two visionaries, you should focus all of your energies on running and growing your business. Trust that your professional accountants are digging into every possible tax efficiency on your behalf. If you’re not confident that they are, find a new accountant (or just give us a call).
Now, like most good things in business and life developing a new mindset towards a subject doesn’t happen by chance and a growth mindset is no exception.
There are many many articles, books and podcasts to be found on Google in relation to developing a growth mindset. One noteworthy author on this subject is Carol Dweck, a Professor of Psychology at Stanford University. Her book Mindset has sold more than 800,000 copies and highlights the importance of a growth mindset for managers and business owners.
Mindset: The New Psychology of Success is a fabulous read and encourages a reframe of the traditional thinking around business. In summary it demonstrates there are many advantages to developing a growth mindset in your business. These include...
- Increased performance
- Greater enjoyment in your work
- Happier (and happier relationships)
- More likely to sleep better
You may notice that all of the listed benefits relate to you, not the business. But it stands to reason that these personal benefits translate to improved business results too.
We digress… If you’re keen to understand more of Dwecks philosophy then you can buy, download or listen to her book on Amazon.
In the meantime, know that where the focus goes the money flows. Break the paradigms of traditional thinking and set about growing your business. Leave the tax stuff to the tax experts.
If you end up paying more than $1 million in tax this year, just know that it's a really great problem to have!
If you need advice or accountancy support, we’re right here for you.
If you have any questions about your business or personal tax position. Contact us for professional business and accounting advise.