A wondrousness of Ritchiness

See if you can work out what’s wrong with this:

The companies have, of course, denied the suggestions made by the Fair Tax Mark, which I advise. For the record, the Fair Tax Mark press release is reproduced below. What researchers might like to focus on is the difference between cash provided as a liability and cash actually paid for tax liabilities. Questions about the accounting would seem to arise.

Or alternatively, what questions about accounting?

Then, let’s see if your answers are the same as/better than mine in the ASI piece already filed for Tues morning…..

17 comments on “A wondrousness of Ritchiness

  1. I’m not an accountant but i’ll have a bash.
    Directors have the legal duty (and incentive) to
    a) Pay all taxes that are owed but only the taxes that are owed.
    b) File conservative accounts. So if there is a question over tax due (or any other liablity) – to record the higher interpretation of liabilities in the accounts.

    If there is a dispute/ claim,by the taxman himself rather than a Fair potato mark report, that more is owed, Then, inso far as the case has any merit, the directors should set aside the claimed amount as liablities. To establish whether it is owed or not will be for a court to determine. Court cases take time. Thus paid and provided for will not usually match in one fiscal year. Also there’s not many cases brought saying :oi you guys have paid too much/ no we haven’t/ yes you have see you in court mr Bezos. So i’d expect the balance of disputed sums to be a liability in the accounts.

  2. ‘The companies have, of course, denied the suggestions made by the Fair Tax Mark’

    Fair who? They likely ignored the suggestions. Though I like the ‘of course.’

    ‘cash provided as a liability’

    I don’t know what this means.

  3. What researchers might like to focus on is the difference between cash provided as a liability and cash actually paid for tax liabilities. Questions about the accounting would seem to arise.

    Can’t find your piece yet, but I’ll have a go at it.

    Tax expense, and the associated liability, that is presented in IFRS basis financial statements is an estimate of the tax that would be paid by the entity on income calculated on an IFRS basis, rather than actual tax. Given that, there will always be differences between tax expense, tax liabilities and tax paid.

    This is Accounting 101 stuff… Permanent differences, timing differences, blended rates, etc.

    And as a trained, credentialed accountant, I’m a bit of a loss at this: “…cash provided as a liability…” What in the world does that mean?

  4. From Murphy’s post:

    1st Amazon. Stands out as the business with the poorest tax conduct, having paid just $3.4bn in income taxes this decade. The cash tax paid was 12.7% of profit over the decade, at a time when the federal headline rate of tax in the United States was 35% for seven of the eight years under examination. The company is growing its market domination across the globe on the back of revenues that are largely untaxed, and can unfairly undercut local businesses that take a more responsible approach. The situation is unlikely to reverse soon given the $9.3bn of operating loss carryforwards available to offset against future profits and taxes.

    This is wonderous, largely because it manages to explain why Amazon paid so little on taxable income…

    The situation is unlikely to reverse soon given the $9.3bn of operating loss carryforwards available to offset against future profits and taxes.

    Again, this is Accounting 101 stuff.

  5. The Dicktator – November 27 2019 at 8:56 am, in response to SSE’s (coincidentally holders of the Fair Tax Mark) disputed tax ruling victory against HMRC:

    ‘But challenging HMRC is not an issue. Indeed, as a practising accountant I am at present engaged in a dispute with HMRC on behalf of a client because HMRC is blatantly (in my opinion, and I expect to win) wrong on a legal issue. They make mistakes. They need to be challenged when they do. And that’s not a reason for not getting an FTM.
    I’m ducking nothing. I am saying a) tax rulings happen and b) so do disputes and c) that’s why we have courts’

    If only Apple, Facebook et al realised the latitude granted in interpreting their behaviour if they’d just paid their tithes to the FTM.

    I don’t see how this isn’t simply an attempt at corporate extortion.by fat bastard and his mates.

  6. I don’t see how this isn’t simply an attempt at corporate extortion by fat bastard and his mates.

    That’s because it is attempted extortion.

  7. Not having read the full article I am simply guessing that the provision in the balance sheet at 31/12/18 is the estimate of tax due but not yet paid whereas as the tax paid shown in the cash flow statement is the tax already paid during the year so not part of the tax not yet paid and the tax line is tax due on the profit for the year. which will include some deferred tax liability, less any over-provision in prior years because the directors took a cautious view *see Hallowed Be’s explanation above) and is not the tax paid during the year because it can only be calculated after the year-end and is part, but not all, of the tax liability in the balance sheet.

  8. would cash provided as a liability be money lent to the entity and recorded as a loan? A lot of lefties are opposed to loans and deducting interest as a cost.

  9. The major issues these tax puritans fail to take into account is the amount of personal tax employees of these firms pay, and the reinvestment of profit in search of high growth rates to justify high future valuations. Generally the average staff remuneration is pretty high, often with stock options that vest (and are taxed) in various years, and this is why actual annual taxable profits are relatively low for such high levels of turnover.

    I seem to recall that somebody here looked at the net impact of employees suffering personal tax rates versus the corporation suffering corporate tax rates, and rewarding staff handsomely yielded a far higher overall tax take than if the company retained those earnings as taxable profit.

    But then I guess ‘greedy 1 percenters’, wealth inequality etc……..

    These companies really need to coordinate and warn these wankers that they won’t be extorted, and if this nonsense carries on, they’ll be seeing them in court.

  10. Worzel,

    I think your referring to when Google (Alphabet?) London decided to pay all its profits in staff bonuses rather than pay CT and repatriate the rest.

    IIRC, I haven’t got time to find them, it meant that something like 3x as much went to HMRC in direct payment without calculating 2nd or higher order taxes like VAT.

    For some reason the left wouldn’t accept that argument and went apoplectic.

  11. @Worzel December 2, 2019 at 6:22 pm

    ‘greedy 1 percenters’ in UK are those with an annual income over ~£160,000 (IFS)

    Surprisingly low; I’d have guessed over £1 million

    @BiND

    +1

  12. Challenges are ok and this from the author of the tax gap that claims even legal deductions should be counted as missed tax, wonder if he will be revising his tax gap?

  13. ‘getting an FTM’

    Note that the FG considers FTM to be common knowledge, no need to spell out the abbreviation. Else he’d say, “getting a FTM.”

    He is devoid of empathy. Not as in caring for other people, but being able to comprehend the world from other people’s point of view. It is a serious character defect.

  14. BiND. And soapy Jo was one of the leftards who was unable to understand. He ended up saying something along the lines of “paying more tax in some other way is no excuse for avoiding corporation tax”. The man is a fool

  15. “Indeed, as a practising accountant I am at present engaged in a dispute with HMRC on behalf of a client because HMRC is blatantly (in my opinion, and I expect to win) wrong on a legal issue.”

    No he isn’t. He’s making it up. Someone should ask him who the client is or what the issue is.

    He won’t say.

  16. Indeed, as a practising accountant I am at present engaged in a dispute with HMRC on behalf of a client because HMRC is blatantly (in my opinion, and I expect to win) wrong on a legal issue.

    Gee, when the Big 4 does that he considers it a crime against nature.

  17. I thought he said he doesn’t do tax advice for clients any more? Given his technical incompetence I feel sorry for anyone who uses him.

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