Today\’s Glorious Ritchie Report!

Dear Lord you\’ve got to hand it to hte man. His stupidity knows no bounds. His latest report.

Since 2009, HSBC and Barclays bank may well have underpaid UK corporation tax to the tune of £2.6 billion. This figure represents the difference between the tax the banks actually paid and what would have been due had they been taxed under what’s called a unitary taxation system. The data’s in a new report I have written with Meesha Nehru for the Tax Justice Network. As we argue, year on year, this is an extra £650 million that just two banks could be contributing to the Exchequer if we had a fairer corporate tax system in the UK. To put this amount into perspective, according to HMRC the total contribution of the banking sector in corporation tax (on income as opposed to the separate bank levy on debt) in 2011-12 was £1.3 billion.

And then they go on to look at profits and taxes in the 2009 to 2012 tax years. And they try to break out the UK paid taxes from the total global taxes. And amazingly they end up demanding that the two banks must pay much more in the UK. And they propose unitary taxation to make them do so.


At which three points occur.

1) The total effective tax rates don\’t look out of line. Indeed, Barclays appears to have paid 44% and 315% of total profits in tax in the past two years. Their figures not mine note. This means that any greater amount of tax paid in hte UK is only going to come from some smaller amount of tax paid elsewhere. This isn\’t about the banks being made to pay more. It\’s nationalism about who the tax is paid too.

2) They really are whazzocks though. What happened in 1007/8? Ah, yes, that\’s right, the greatest financial collapse since the 1930s, wasn\’t it. Banks made losses, humoungous great stinking losses. But not actually worldwide. HSBC did not make vast losses in its Singapore, Hong Kong or China business, did it? But it did in the UK. And yes, we can indeed carry forward losses: there\’s no possibility of a sensible tax system if you cannot. So comparing UK tax paid to size of UK business in a period when the UK business can use previous losses to offset UK tax bill is going to be, well, somewhere between a little odd and being a complete whazzock.

3) But if unitary taxation is the way to go then we absolutely do not need Ritchie\’s beloved country by country reporting, do we? For the whole point of that is to tax profits where profits are made. Which we don\’t do with unitary taxation. The fool.

It also rather amuses me that global tax paid is the current year charge to the accounts. Whereas with Barclays it is current year tax actually paid for the UK revenues. Corporation tax is paid in arrears lads……

16 thoughts on “Today\’s Glorious Ritchie Report!”

  1. I agree entirely. My comment on his blog, which hasn’t yet got through his moderation (I have a patchy record there 😉 ) is:

    I notice you

  2. Curses 🙂

    Let us try again without contractions:

    I notice you are focusing on UK tax again.

    From the figures you quote, their effective current tax rate over those four years was a little over 35%. If they brought more profit into the UK, where it would be taxed at less than 35%, then you would expect their overall tax bill to go down.

    So, just as with nPower, “tax avoidance” appears to consist of paying more tax than you would recommend.

    Of course as you have not included deferred tax the picture is incomplete anyway.

  3. @Pellinor

    Why do you bother with the fascist bastard? Although, you might be interested to know that he has welcomed the Defamation Act because he is such a believer in free speech, UNLESS IT’S YOU!!! Or indeed anybody else saying things that right-thinking people wouldn’t say, because free speech can’t include people saying bad things can it.

    I digress

    I’ve been reading up on his beloved Unitary Taxation: complete dog’s breakfast. Can I restrict myself to noting that it’s not actually unitary at all. I mean unitary would sort of imply a unified international system, each state’s share being given by a unified formula, right; wrong!

    Gert Whazzocks.

  4. Everyone needs a hobby 🙂

    And I find it useful to have something to do while having a cup of tea to clear my head between looking at different taxes for different clients.

    Murphy might benefit from some of that, of course. Either doing some actual tax work , or having a nice cup of tea, either would help a bit 🙂

  5. Since yesterday, Richard Murphy may well have underpaid UK income tax to the tune of £20,000. This figure represents the difference between the tax he actually paid and what would have been due had he been taxed under what’s called “Ian’s WGCE taxation system”. This system requires that retired accountants from Wandsworth must pay £20,000 per day.

    Paying less than you would have to under a scheme which does not apply to you equates to “underpaying”?


  6. The ever erudite Murphy Richards made this comment under the Richie/Unite post.

    “It is not true that history is written by the victors. It is that whoever writes history is the victor.”

    It really doesn’t matter, Richie being whazzock or not. He’s a whazzock who gets listened to, because he spins a tale people want to believe. “Banks avoid tax” is an easy to comprehend narrative agrees with people’s prejudices. The explanation, why they don’t, isn’t.
    It’s sad, but there are numerous Arnalds out there looking for something to believe & it’s wazzocks like Murphy have the smarts to wrap bullshit into a user friendly package for them. Without much competition from the facts & figures community.

  7. is there a simple consise rationale as to why losses can be carried forward but not profits

    Tim adds: Yes. Because we wish to tax profits.

    Imagine a company that starts a new business. It will take some time for this new activity to start making profits. It will make losses meantime. So, do we tax the £1 million of profit made in year 3? And ignore the £20 million of losses made getting there? Or do we say you can carry your losses forward so that we only, in the end, tax cumulative profits?

    Now take the same activity, the same numbers as above. But two different companies doing it.

    1) Extant company that makes good profits. So, it invests in the new scheme, thus reducing its total profits to nothing for those 3 years.

    2) New company. It only has those losses for the first 3 years.

    If we don’t allow loss carry forward then the two companies will be very differently taxed. The new company will pay higher taxes than the extant one.

  8. Wot Ian Bennett said.

    That opening line is profoundly, and deliberately, dishonest. Even by Richie standards.

  9. Thanks Tim , Good of you to answer.

    Your explanation highlights a problem . The extant Company will pay tax on the 1 million profit in year 4, but the new company will not, but both spent 20 million in getting 1 million profit in year 4.

    Tim adds: I didn’t make clear the other side of it. Co. A makes £20 million over the first three years in its other business. These are not taxed as they are offset by the £20 million start up losses in those years. It’s only by having losses carried forward that we can equalise the two tax treatments.

  10. The other way to look at it is to say that tax is due on profits to date, ignoring artificial things like financial years.

    Carrying losses forward means you only pay tax on your net profits to date.

    Ideally you could carry losses back as well, to get complete symmetry, but restricting your ability to do that seems a reasonable enough way to pretect the revenue to me, really.

  11. Isn’t it actually costs that can be carried forwards, rather than losses? Which doesn’t make any effective difference, but to me makes the whole thing easier to understand.

    Imagine Alan has ten assets he rents out. Each requires refurbishment once a decade costing five years’ income (but that’s the only cost). He will, on average, refurbish one asset per year, costing him half that year’s income, consistently reducing the tax owed.

    Now imagine Bob has just one of those assets. He’ll only have to refurbish it once a decade as well. When he does so, though, he won’t have enough income in that year to cover it. Nine years out of ten, he’d have to pay income on the full whack, and the tenth year he’d only get relief on the 20% of his costs that would have been profits, and none on the costs that became a loss.

  12. No, the costs get transformed into losses, and (in the UK anyway) you have restrictions on how they can be used which differ from how costs get off-set.

    Bob would pay tax on the income in the first 9 years, then generate a loss in year 10, then carry that loss forward to cover off the profits in years 11-14.

  13. In year 15, of course, there would be complaints that Bob has paid no tax in the last four years despite making consistent profits 😉

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