Under fire for the dire and demented nature of his arguments on his tax avoidance estimates, Ritchie mounts a fightback of sorts.

It will be noted that several comments have been deleted. Those who are abusive do not get their comments on here.

One who was profoundly abusive suggested I had made an error in calculations by ignoring double tax relief and that if taken into account the tax figures make sense.

My reaction is that anyone who believes that is utterly gullible. This claim is dependent upon an extraordinary claim of assumptions. The first is that foreign income is correctly calculated. I doubt this and think it a major cause of tax abuse. Second it assumes foreign tax is paid. Third it assumes that all other elements in profit have no avoidance inherent in them - which as I make clear I doubt - as does the minister, I would add

Well, that Ritchie made an error in ignoring double tax relief is beyond doubt.  He definitely did - the figures prove it.  I mentioned this to him in an e-mail and got a stream of abusive blather in response, so he's going to have to face the music here.

Let's deal with his three claims:

1. It's an assumption that foreign income is correctly calculated.  Sure it is.  But HMRC already has several weapons it can call on to ensure that companies don't cheat.  But the basic principle is in Parliament's gift, that "Tax credit relief is given against United Kingdom Corporation Tax either under the terms of the double taxation agreement or unilaterally. The relevant statutory provisions are contained in ICTA88/S788, ICTA88/S790, ICTA88/S792, ICTA88/S797, ICTA88/S797A, ICTA88/S806, ICTA88/S806A-M, ICTA88/S807A and ICTA88/S810 - ICTA88/S811."   There are, to be fair, some particular problems when it comes to related parties, which is why there are vast quantities of anti-avoidance legislation addressing the problem, as well as specific rules to stop abuses such as loan relationships.   I would trust HMRC's estimate of tax avoidance over Murphy's, given that his is merely made up and theirs is based on evidence.
2. It assumes that foreign tax is paid. Equally, by excluding the entire figure, Murphy assumes that no foreign tax is ever paid.  Which is more likely?
3. It assumes that all other elements in profit have no avoidance inherent in them.  No it doesn't.    Add DTR back in, and you get an overall effective tax rate for all companies of 29.0%.  That's very close to the large company tax rate of 30%.  Murphy's calculation of avoidance is based on the naive claim that the effective rate can be compared to the statutory rate without need for adjustment and that any difference is due to avoidance. In addition, HMRC has analysed the adjustments to profit - both addbacks and deductions - and has mechanisms to assess the veracity of the contents of both.  So they're happy with the adjustments, which in any case broadly net out to a small number.  If there's avoidance, then it's contained in that number, at least according to Murphy's methodology.

In other words, none of his responses hold water.  Omitting DTR from the calculation was an enormous howler, and one which has seen Ritchie furiously backtracking and obfuscating.  It's about time he came clean about his mistake and represents his calculations on a revised basis.  Fat chance of that, I fear.

People who read this post also read:

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• On whether the Tax Justice Network is dominated by Richard Murphy
• Another clanger in Ritchie’s tax gap paper
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Filed under: Other blogs, Taxation with tags double taxation, idiots, pwned, richard murphy, tax avoidance