May 19, 2020

Arcadia Group aims to recapture Topshop brand after business is placed in administration

Retail
Stuart Hodge
2 min
Arcadia Group aims to recapture Topshop brand after business is placed in administration

The Arcadia Group, which owns the Topshop and Topman brands, looks set to take back control of the businesses from Austradia after Topshop Australia was placed in voluntary administration yesterday.

Hilton Seskin, the veteran retailer who owns Austradia, has reportedly agreed to hand the company back to its founder Sir Philip Green, after discussions which have taken place over a number of months.

Seskin, who secured the local franchise from the Arcadia Group six years ago, has told the Australian Financial Review that the franchise model for fashion retailers is "broken".

He says it became clear the franchised business was unable to compete with vertically-integrated retailers such as Zara, H&M and Uniqlo, who have opened up dozens of new stores.

The administrative measures will enable Arcadia, Austradia, the administrators and Myer, which owns a 20 per cent stake in Austradia, to restructure the business faster.

James Stewart, who’s a partner at administrators Ferrier Hodgson, says the brand’s founder is keen to ensure that it remains a player in the market.

He said: "Sir Philip Green has expressed a very strong interest in maintaining the Topshop and Topman brand in the Australian market.

"The future operating model of the business will be determined by Sir Philip.  Our current expectation is that the business may need some restructuring but that it will survive and prosper.

"He regards it as a wanted brand for the Australian market and a valuable brand for the Australian market.”

The business struggled with a number of issues, including the complexity of the supply chain and counter-seasonality and lost market share to its' rivals.

Austradia, which had annual sales of about $90 million, lost $3 million in the six months ending December, based on losses of $600,000 reported by Myer at its half-year results in March.

It’s not yet sure what the future of Myer’s stake will be but Arcadia Group is likely to maintain a concession agreement with Myer, which opened 17 Topshop and 17 Topman concessions in Myer stores after buying a 25 per cent stake in Austradia in September 2015.

"Sir Philip Green is very interested in maintaining the Myer relationship,” Stewart added.

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May 14, 2021

Opinion: Are you ready for a wealth tax?

taxes
wealthtax
finance
singapore
Eryk Lee, CEO, AAM Advisory in...
5 min
With wealth taxes back on the cards worldwide, Eryk Lee, CEO of AAM Advisory in Singapore outlines what a Singapore wealth tax could look like

Wealth taxes – a levy charged on the total value of someone’s wealth – have fallen out of favour over the last 20 years with only three OECD countries choosing to levy a recurring tax on wealth, down from 12 in 1990. Almost overnight, however, wealth taxes are back on the cards worldwide, as governments grapple with rebalancing the books post-pandemic.

As the world turns its attention to paying for the pandemic, there has been a steady chorus of calls – most notably in the US and the UK, and recently from the International Monetary Fund – to introduce a new tax on the value of someone’s wealth. Singapore is not immune, and it is likely we will see a review of Singapore’s wealth taxes in the future.

After Coronavirus, anything and everything must be on the table and up for consideration by the government to fill the fiscal hole left by the pandemic. We have never experienced a crisis quite like this, and the government must quite rightfully have a serious conversation about what needs to be done next to help balance the books post-pandemic.

The truth is that Singapore, like most of the world, has an ageing population that will require more and more tax revenue to pay for an ever-increasing cost of care. It sounds logical for a wealth tax to fill that revenue requirement, but there is one big issue with such a tax: it is complicated, very complicated.

The government would have to track down and accurately value all kinds of assets considered to be ‘wealth’, from fine art to Ferraris and everything in between. And for this they will need a vast, and expensive, administrative army.

What happens to people with considerable illiquid assets but few liquid assets to settle the bill? How do you value an insurance or pension policy, which may pay a sizeable amount but isn’t sat as a capital sum in someone’s account? How do you value someone’s wealth tied up in their business?

Then there’s a question of implementation. Do you go for a one-off tax or an ongoing tax? Do you focus the tax on the mass affluent or just the ultra-high net worth? What assets are you going to include as wealth? What rate will you set the tax at? Will there be any exemptions?

Then there is the most important question of all: how do you avoid killing the goose that lays the golden egg by spurring people to up sticks and leave to avoid paying the levy? This is a particularly acute problem for Singapore given our competitive advantage largely rests on an attractive low tax regime.

While the jury is still out on whether Singapore will go down the route of introducing a new wealth tax, the government may be tempted to instead tweak existing taxes, or introduce new, less controversial, taxes on wealth. A case study in this is the UK, whose government categorically rejected proposals by a wealth tax commission to introduce a one-off wealth tax, but that didn’t stop them tweaking pre-existing taxes on wealth, including capital gains tax and inheritance tax at the Budget in March.  

If the UK is anything to go by, we could see all the talk of a new wealth tax in Singapore translate into changes to pre-existing taxes, or the introduction of new, but less severe taxes on wealth including estate duty and capital gains taxes.  

As there are clearly more questions than answers at this stage, it would be wise to get your ducks in order and consider how your wealth is structured so that when the time comes for any future tax tweaks, you are prepared and can ensure maximum efficiency.

If implemented, a wealth tax can come in many different forms, which clearly means that any wealth structuring will depend on the actual rules on implementation. But as an example, if a wealth tax comes in the form of capital gains tax upon the sale of an investment, it may be worth considering holding your investments in a tax efficient vehicle such as a Private Placement Life Insurance (PPLI), whereby the liability to tax can be deferred into the future.

Within this vehicle, investments can grow virtually tax-free, until a chargeable event such as death, maturity, early encashment or surrender occurs. As little to no tax is being charged, there will be more investment returns to compound over time. Using a tax-efficient structure and the power of compounding are two of the most important tools in the accumulation and preservation of wealth.

If Singapore goes down the route of estate duties or inheritance tax, we can take guidance from other jurisdictions. For instance, a properly structured Trust or Private Placement Life Insurance can minimise estate taxes, but for certain assets there may be a ‘look through’ so such structures may not be appropriate. In such instances, an insurance policy can provide liquidity to help the beneficiaries pay the tax bill.

It is important to note that the effectiveness of various structures will depend entirely on the tax rules being implemented in Singapore. The key is to have an open mind as there are many possibilities on structuring your wealth to achieve tax efficiencies and efficient succession planning. A financial adviser experienced in such structures can provide this support and can position your finances so that you are prepared for whatever is thrown at you post-pandemic, a wealth tax or otherwise. But speak to different professionals as well, as there is no one solution that works for all, it really depends on your scenario and what you want to achieve.

Eryk Lee is chief executive of AAM Advisory, part of Quilter plc

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