Nando’s finds shirking claims too spicy

ARGUABLY SA’s most successful export, Portuguese-style chicken chain Nando’s is in the spotlight after Britain’s Guardian newspaper claimed it may be shirking its full tax burden with an unnecessarily complex and opaque structure.

The paper claimed the owner of Nando’s, South African insurance tycoon Dick Enthoven, used a secretive R13.78-billion trust in the Channel Islands to collect royalties and other payments from Nando’s franchises through a complicated web of offshore structures.

The wealthy Enthoven family also owns insurance company Hollard and wine estate Spier.

Nando’s structures — which make use of accounting devices in tax havens such as Malta, the Isle of Man, Guernsey and Luxembourg — “significantly reduce the amount of tax the company and the family pay around the world”, the article said.

The owners of Nando’s “also legally reduce their UK corporate tax bill by making various permissible payments offshore. Nando’s does then pay UK corporation tax on the remainder of its profits.”

But Nando’s UK hit back, saying it paid more than R220-million to the UK exchequer in corporate tax last year — 23% of its operating profit.

“Nando’s is a family business. It’s still owned and run by the people who founded a single chicken shop in South Africa and have grown it to become a global company with 1 050 restaurants in 22 countries,” it said.

“Serving chicken in so many different places does make our parent group’s financial structure complex, but we have always been open and honest about the tax we pay in the UK.”

While the Guardian suggested Nando’s could be liable for up to 50% more tax than it paid, a Nando’s spokesman rubbished this idea. No company in the UK paid 33% corporation tax, he said, which was what Nando’s would have to pay with that suggestion.

Deborah Tickle, KPMG’s director for international corporate tax, said every company was allowed to structure its affairs to be most tax-efficient. “There is no obligation to pay more than the tax required. What many countries have done is put in place what they call impermissible taxavoidance legislation, so certain types

The media is exposing those who plan for tax aggressively

of avoidance are not acceptable, where there is no commercial rationale behind a transaction.”

But so far Nando’s appears to have done nothing illegal. Tickle said these structures were typical not just for the extremely wealthy but for individuals with far fewer assets.

“Assets can be put into a trust for all sorts of reasons,” she said.

But authorities are trying to clamp down on complexity and stop tax base erosion and “profit shifting”, where companies make profit in one country and shift the cash somewhere else where they are taxed less.

While companies can pay only what they’re asked to, there is a caveat.

“Reputational risk is an issue, and the media is exposing those who plan for tax aggressively. The Starbucks case is well known here. We’re seeing an awareness of it in our clients now, and there’s been a definite reduction in appetite for doing something out of the norm,” Tickle said.

Starbucks was hauled over the coals for paying no tax until it was forced to in 2013 — despite its mega UK sales.

The South African Revenue Service is only an interested bystander right now. It said that if the Guardian’s assumptions were true, the article “encapsulates the inherent challenges confronting tax administrations regarding base erosion and profit shifting”.