If only the Fair Tax Mark knew what they were talking about

The Fair Tax Mark wants to tell us all that the Silicon Valley giants aren’t paying enough in tax. Their analysis rather failing on two technical points which they, as self-declared experts in taxation, should really know about. Plus, obviously, the economic point that we value organisations producing things for the value we place upon their production - defined as our value in the consumption of them - not how much tax they pay.

That last will obviously not penetrate their tutti nello stato mindset but the two technical points do still invalidate their analysis:

The big six US tech firms have been accused of “aggressively avoiding” $100bn (£75bn) of global tax over the past decade.

Amazon, Facebook, Google, Netflix, Apple and Microsoft have been named in a report by tax transparency campaign group Fair Tax Mark as avoiding tax by shifting revenue and profits through tax havens or low-tax countries, and for also delaying the payment of taxes they do incur.

The first technical point is that the thing being complained about has already been solved. By President Trump in fact. There was an oddity in US corporate tax law - foreign profits were only taxed in the US if they actually came onshore in the US. Thus, if by some clever book-keeping, profits could be parked outside the US and yet tax free from other jurisdictions no taxes would be charged. This didn’t do much good in the long run as such profits could not, cannot, be paid out to shareholders without coming onshore and thus being taxed. But that is what was being done and some $2 trillion - the figure varying dependent on who was asked to do the totting up - was stashed on varied Caribbean islands.

We’re all in favour of this of course but the law has already been changed. Part of the Trump tax changes was that, repatriated or not, those profits are subject to US taxation. There are no pots of entirely untaxed corporate profits any more. The problem being complained of has been solved, by a Republican to boot.

The second technical point is that they’re doing their counting wrong. Something of a distinct problem for people attempting to do that beancounting.

The report finds that there is a significant difference between the cash taxes paid and both the expected headline rate of tax and, more significantly, the reported current tax provisions.

You cannot - usefully at least - compare cash taxes paid with expected taxation because corporation tax is due in arrears. The amount of tax for the financial year 2016 is actually due in the financial year 2017 and so on. When companies are growing fast, something we’d agree the SV Six tend to do, this means that there always will be a low tax rate for we’d be comparing tax paid for 2016 with tax due for 2017, that latter being a much larger sum. It’s even possible to test this. When the profits stutter - as has happened to at least one of the companies - then the tax rate rises substantially as the tax payment for the earlier, more profitable, year is handed over in one where the tax due at headline rates falls.

It’s entirely true that we disagree with the Fair Tax Mark on everything, including the cuteness or not of kittens. But we do think it would be helpful if they were aware of the details of the subject under discussion and, just possibly, were able to count properly.