Apple would pass Ritchie’s Fair Tax Mark

Ritchie’s new fantasy is now online. With this great bit in it:

7. Numerical reconciliation
Purpose
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
expenditure.
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.
Information required
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?

16 thoughts on “Apple would pass Ritchie’s Fair Tax Mark”

  1. Yes, but we know that thinking through the implications of his proclamations isn’t really his forte. In fact, he actively dislikes it to the extent of deleting any comments on his blog that attempt to do just that.

  2. Actually, if Ritchie had half a brain, he’d be demanding that IFRS & GAAP be rewritten to abolish the use of tax expense and liability estimates based on IFRS & GAAP. What he should be demanding is the actual tax figures be presented in the financial statements.

    Twat.

  3. This ‘Fair Tax Mark’ seems like a rather convenient way to identify companies in which I won’t be investing.

  4. http://www.fairtaxmark.net/who-we-are/

    Read the biographies – one of them uses her PhD in Latin American studies to help “understanding of corporate accounts, structures and taxation”.

    The rest are the usual rag-bag of “activists” and “campaigners”.

    Apart from Ritchie. Read the lengthy bio he’s included to understand the sheer vainglorious nature of this whole project. It’s just to boost his own self-deluded ego. And all of the other members will bow at the feet of this “tax expert” as they don’t have the knowledge to challenge him or the wit to seek out or understand other viewpoints.

  5. As Christie points out the guidelines for multinationals and for UK companies operating across multiple jurisdictions don’t yet exist. No doubt CEOs looking for a scapegoat for bankruptcy could sign up to these proposals as they stand…..

  6. The other thing worth mentioning here is how little Ritchie knows about how tax estimates under IFRS or GAAP are actually produced. As the tax figures in the financials are estimates, any of the reconciling items Ritchie wants would be exactly the same thing… estimates. It’s also worth noting that IFRS & GAAP gives guidance as to the calculation of estimated taxes… it is based on estimating taxable income and then applying a hypothetical tax rate, which can be blended. The emphasis is on producing an accurate figure for estimated income… not on producing a tax rate that reconciles to anything. If fact, for a company such as Apple, the tax rate used is probably based more on historical results than anything else.

  7. This is exactly the sort of person who should be telling businesses how to run their affairs:

    Tim Hunt – Marketing / Director
    Tim Hunt is a researcher, communications chief and director of Ethical Consumer Research Association.

    Tim has worked in alternative media for eight years. He was a founder of radical publication Manchester Mule and is now a worker director of Ethical Consumer magazine and a board member at Red Pepper magazine.

    He left university in 2002 and embarked on a “career” in activism working on a number of social and environmental justice projects including the Camp for Climate Action, Action for Sustainable Living and the Basement Social Center, while also conducting freelance research focused on the local economy and democracy. He returned to university in 2007 and gained a masters degree in sustainability before joining Ethical Consumer in 2008.

    Recently Tim has been leading on Ethical Consumer’s Boycott Amazon campaign, which provides consumers with tax-paying alternatives to online retailer and arch tax avoider Amazon. He also broke the story of the London 2012 Olympics as a tax haven and worked with 38 Degrees on the successful campaign to get the corporate sponsors to waive their right to the Olympic-sized tax break offered to them for the duration of the games.

  8. “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.”

    The man’s a moron.

    A company’s tax liability is NOT defined as the “difference between the tax that might be expected to be paid in the period and the tax actually due for that period”. It isn’t under IFRS and it isn’t under GAAP. Never has been.

    Amounts actually paid by the company do not enter into the calculation of either tax expense or any tax accruals booked under IFRS or GAAP. Both figures are estimated based on income calculated under IFRS or GAAP rather than tax law.

  9. “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.”

    In the US, that’s because there are six difference “headline rates” that can apply to a C corporation: 15%, 25%, 34%, 35%, 38% and 39%. These rates phase in and out on taxable income between $1 and $18,333,333.

    Taxable income of $18,333,333 produces a tax bill of $6,416,667 – a rate of 35% – but for taxable income amounts below $18,333,333, actual rates can be anywhere between 15% and 35% without any tax preference items. The difference in actual rates are a function of the tax brackets that are in place.

    Since when does a man who cannot understand the difference between an actual tax rate and a marginal tax rate get to call himself a “tax expert”.

  10. I think I understand his plan, he can now blackmail companies to pay him although they will be attacked by mobs.
    He is to fair tax what Pablo Escobar was to pharmaceuticals.

  11. Although to be fair to Escobar at least he carried out his own dirty work or paid someone to do it, rather than whip people into a frenzy via the Guardian.

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