Yet another problem with Fair Tax Mark

Posted by Christie Malry on June 20, 2013 at 3:59 pm

So, Ritchie has responded to Ben Saunders in a very ill tempered and ad hominem filled rant.

I don't think he's addressed Ben's criticisms at all. But I'll let Ben deal with that as he sees fit.

I want to look at another point. It's the FTM's definition of "fair". They're looking to see whether, over a six year period, the effective current tax rate is close to the statutory tax rate. The difference is weighted so as to give higher relevance to more recent years.

So far so good. Except, as Ben shows, this gives daft results even where tax differences completely reverse over the period. A company that does pays tax on its accounting profits at the statutory rate should have a "weighted difference in tax" score of zero. By definition.

Yet you may have missed the implicit concession that the Fair Tax Mark campaign has made here.

And that's this: by relying on six years of accounting profits and the effective rate in each year, they're saying that IFRS gives a proper measure of company performance. Remember, Fair Tax Mark says that "fair" means a profit "should be taxed in the UK at the time it was earned". So FTM must believe that IFRS is effective at reflecting economic performance on a timely basis.

Is Ritchie comfortable with admitting this?

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