Third, there is the problem of determining what tax charge is to be considered. Deferred tax has to be ignored. It is quite literally made up and is, of course, never paid, so it must be discounted, entirely. But what we also know is that historically the current tax provision in most accounts is also overstated. I first noted this in 2006 and more recent evidence suggests that the trend continues. Companies over-provide for their current tax and then release their provisions when their tax avoidance proves to be effective. So the tax provision in the accounts of a company for any one country may also not be the right basis for determining an acceptable effective tax rate by jurisdiction.
Is cash paid the right basis, then? It may be, but critically this has to relate to a year rather than be the sum paid in a year. This will take time to calculate, and be subject revision.
Isn’t the second paragraph just saying that we do in fact have to use some measure of deferred tax?