Ritchie misunderstands Glencore\’s tax affairs

Not all that surprising, Ritchie manages to misunderstand most things.

As a private Swiss-based company, the tax charges in the trading business are borne by its employees. The partners – about 485 employees – accumulate tax liabilities during their work career and pay them when they cash their shares at retirement as income tax.

So, the reason that Glencore doesn\’t pay much corporation tax is because it\’s not taxed as a corporation. It\’s taxed as a partnership, an LLP if you like, with a deferral available to the partners who are liable for the tax.

Absent that deferral part, it\’s taxed in exactly the same was that Murphy Deeks Nolan was when Ritchie was running it. Profits are assigned to the partners, the partners pay tax on those profits as if they are the partners\’ incomes.

All very simple and nothing to get upset about.

It was due to to the fact that Switzerland let them trade virtually tax free, providing a wholly artificial competitive advantage.

Oh, really? Did Murphy, Deeks, Nolan trade virtually tax free? Wouldn\’t be the first time Ritchie has ranted about tax rules that he himself has used of course but I rather think that wasn\’t the case. It\’s just that partnerships are not taxed as corporations, they\’re taxed as partnerships.

Who has suffered from this? Well, you have. Prices are too high as a result of the actions of this monopolist.

Gosh, that\’s innovative. The absence of taxation leads to higher prices to consumers? Can\’t quite see it myself I have to admit.

Who else has suffered? Undoubtedly the poorest countries in the world have, who have not enjoyed prices they should have been paid if a freeer market had existed.

My word, another innovative theory. That the absence of taxation leads to lower prices to producers.

And let’s note: this is not the result of free market action. This is the result of state subsidy. The Swiss state chose to subsidise Glencore by way of not charging it to tax that it would have been charged elsewhere.

No, Glencore itself is paying tax as if it were a small accounting partnership in Wandsworth. You know, it\’s the partners who pay the tax, not Glencore? Like Mr Murphy did at Murphy Deeks Nolan?

Agreed that the partners themselves are getting a deferral, but Glencore ain\’t.

The rest of Ritchie\’s rant is just that, a rant based on Our Favourite Retired Accountant not understanding the tax system he\’s complaining about.

BTW, I\’ve said this before: I hold no candle for Glencore, wouldn\’t trade with them if you paid me to do so. But that Ritchie can be wronger than Glencore is a surprising fact of life.

10 thoughts on “Ritchie misunderstands Glencore\’s tax affairs”

  1. “the poorest countries in the world have, who have not enjoyed prices they should have been paid if a freeer market had existed.” … “And let’s note: this is not the result of free market action. This is the result of state subsidy.”

    Did Ritchie really just extol the benefits of free markets and diss state subsidies?

  2. ‘The Swiss state chose to subsidise Glencore by way of not charging it to tax that it would have been charged elsewhere.’

    The idea that not taking people’s money away from them is the same as giving someone else’s money to them is pernicious. It might amount to the same thing n the government’s accounts, but it is very different for the people involved.

  3. @GelnnHaldane: that’s what jumped out at me too – the concept that all income belongs to the State and any they allow you to keep is a ‘subsidy’.

  4. The Swiss state chose to subsidise Glencore by way of not charging it to tax that it would have been charged elsewhere.

    On that basis Richie is subsidised by HMRC by virtue of their not charging him the tax he would have to pay if he owned a car radio in Nigeria.

  5. ……Who else has suffered? Undoubtedly the poorest countries in the world have, who have not enjoyed prices they should have been paid if a freeer market had existed…….

    Just to get it straight, is he talking about Glencore here, or CAP

  6. I am inclined to think that this is the Murph-meister’s best column yet. Surely nothing could exceed the idiocy on display here.

  7. Worstofall: Don’t really understand what you are on about. You say that the reason that Glencore AG does not pay corporation tax is because it’s a partnership and therefore (I infer)it is transparent for tax purposes. So the partners pay the tax on its profits. But in a partnership (in the UK) there is no deferral of tax until “shares” are sold, because a partnership (even an LLP) doesn’t have shares (unlike an AG which I think Gencore is).

    In other words RM is saying that Switzerland has laws which enable huge corporations (and their shareholders) not to pay any tax on profits earned.

    There is no comparison to a partnership in the UK.

    Worstofall:

    Tim adds: gosh that’s very good my “I won’t tell you who I am ” commenter. No really.

    How kind, and how fourth form.

    You say that the reason that Glencore AG does not pay corporation tax is because it’s a partnership and therefore (I infer)it is transparent for tax purposes. So the partners pay the tax on its profits.

    Yes!

    But in a partnership (in the UK) there is no deferral of tax until “shares” are sold, because a partnership (even an LLP)

    Correct! Switzerland law is different,

    In other words RM is drivelling.

    Glad you’re aboard!

    BTW, purely personal thing. You want to play with me? Fine….who are you? Anon, no

  8. me is posting quite a lot in various places. It seems to be a blend of Caroline Lucas, Richard Murphy and Mr Smurph. Even Left Outside has a bigger intellect, which nis not saying very much. Not sure that LO knows when to leave the rubbish outside for the serfs to collect.

  9. Worstofall: You misunderstand me. When I said “I infer” I meant that I infer from your comments that you think Glencore is transparent for tax purposes in Switzerland. It is not. It is taxed as a corporation see link below:

    http://www.stmswiss.com/company-services/taxation-of-companies-in-switzerland/

    So your statement:

    “the reason that Glencore doesn’t pay much corporation tax is because it’s not taxed as a corporation.”

    Is incorrect?

    And, no, I’m not comming out to play.

    Tim adds: Well, “me”, whoever you are. That does seem to be different from what both Ritchie and the FT say is Glencore’s taxation system, doesn’t it? If Glencore isn’t tax transparent, if it isn’t the partners who are due to pay the tax, then both the FT and Ritchie are wrong in what they say.

    Itf it is tax transparent, with a deferment, then all three of us have at least some part of the truth.

    So, which is it? Is Glencore taxed as a corporation in Switzerland, in which case the FT and Ritchie are wrong? Or not?

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