The stupidity of the Ritchie Diaspora

So, I asked yesterday what was the thing being done wrong by the Fair Tax Mark:

The answer:

You cannot – usefully at least – compare cash taxes paid with expected taxation because corporation tax is due in arrears. The amount of tax for the financial year 2016 is actually due in the financial year 2017 and so on. When companies are growing fast, something we’d agree the SV Six tend to do, this means that there always will be a low tax rate for we’d be comparing tax paid for 2016 with tax due for 2017, that latter being a much larger sum. It’s even possible to test this. When the profits stutter – as has happened to at least one of the companies – then the tax rate rises substantially as the tax payment for the earlier, more profitable, year is handed over in one where the tax due at headline rates falls.

Of course, their report isn’t available as yet so it’s not possible to quote them getting this wrong. But then sending the press release days before anyone can check the claims is proof perfect of flatulent tosspottery going on anyway, isn’t it?

5 comments on “The stupidity of the Ritchie Diaspora

  1. Diaspora? The Lost Tribe of Ely?

    This isn’t a semantic.
    Of course it isn’t – there’s no such thing as a semantic.

  2. You cannot – usefully at least – compare cash taxes paid with expected taxation because corporation tax is due in arrears. The amount of tax for the financial year 2016 is actually due in the financial year 2017 and so on.

    Nope. Sorry, Timmy, the above statement doesn’t wash.

    In the US of A, C corporations are required to make estimated tax payments during the year in question. Payments are due on April 15, June 15, Sept. 15 and Dec. 15. Underpayment of estimated tax results in penalties and interest. Note that the same is required for corporate income taxes due at the state and local levels. I guarantee you that the sort of Fortune 500 firms RM is targeting are making accurate estimated tax payments in the year the tax will be due.

    Herein lies the problem. RM is attempting to piece together an extremely complex tax scenario without the benefit of any tax returns. Each of the six companies he named operate in more than 150 countries. They file multiple tax returns to multiple tax jurisdictions using multiple tax codes in each of those countries. You can pour over financial statements and SEC filings to your heart’s content, but there simply isn’t enough pertinent information available for the sort of analysis he is attempting to do. It’s a fool’s errand.

    And let’s not forget that taxes paid on the statement of cash flows is not limited to income tax payments. There are property taxes, excise taxes, etc. to be accounted for. So for each of the six companies, add a few hundred (at least) more tax returns that aren’t available.

  3. You cannot – usefully at least – compare cash taxes paid with expected taxation because corporation tax is due in arrears. The amount of tax for the financial year 2016 is actually due in the financial year 2017 and so on.

    Nope. Sorry, Timmy, the above statement doesn’t wash.

    In the US of A, C corporations are required to make estimated tax payments during the year in question. Payments are due on April 15, June 15, Sept. 15 and Dec. 15. Underpayment of estimated tax results in penalties and interest. Note that the same is required for corporate income taxes due at the state and local levels. I guarantee you that the sort of Fortune 500 firms RM is targeting are making accurate estimated tax payments in the year the tax will be due.

    Herein lies the problem. RM is attempting to piece together an extremely complex tax scenario without the benefit of any tax returns. Each of the six companies he named operate in more than 150 countries. They file multiple tax returns to multiple tax jurisdictions using multiple tax codes in each of those countries. You can pour over financial statements and SEC filings to your heart’s content, but there simply isn’t enough pertinent information available for the sort of analysis he is attempting to do. It’s a fool’s errand.

    And let’s not forget that taxes paid on the statement of cash flows is not limited to income tax payments. There are property taxes, excise taxes, etc. to be accounted for. So for each of the six companies, add a few hundred (at least) more tax returns that aren’t available.

  4. Similarly in the UK large companies pay corporation tax in quarterly instalments – currently 2 are made in the tax year and 2 in the following tax year. Only smaller companies pay their tax in the following year.

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