Ritchie’s new fantasy is now online. With this great bit in it:
7. Numerical reconciliation
This criterion assesses whether it is possible to understand a company’s tax
liability using its numerical explanation.
It is rare that a company pays an amount in corporation tax equivalent to the
current headline tax rate multiplied by its declared profits before tax. There are
many and varied reasons for the differences that arise, from tax allowances for
capital investment and research and development due to the expenses that
may be disallowed for tax purposes e.g. those relating to business entertaining
If a company’s tax liability is to be properly understood the difference between
the tax that might be expected to be paid in a period and the tax actually due
for that period must be explained in a clear and transparent manner.
A numerical tax reconciliation note should be included in the accounts, which
explains in sufficient detail the difference between the current reported
accounting profits and the current tax rate. The reconciliation should be
specific in the matters it refers to and not rely on vague descriptions. To this
end, at least 75% of the reconciling items should be precisely described e.g.
using such phrases as ‘The impact of capital allowance claims’ or ‘Reduced tax
owing on capital gains arising’. Terms such as ‘Other’ or ‘Losses’ (without
explanation being given) do not qualify in this respect.
In it’s 10k Apple is very clear about how its tax rate is calculated. They pay around 2% on their foreign profits simply because they do not bring them into the US as US law clearly and specifically allows. They pay full rate, minus the usual capital allowances, R&D etc on their North American income.
So, Apple would pass the Fair Tax Mark then: which isn’t quite what I think Ritchie means, is it?