Fair Tax Mark: unprofitable = unfair?

Here’s a company that has struggled in the recession. It’s made losses and has returned to profitability. There are no other adjustments to the taxable profit.

Just by using its trading losses (as intended by Parliament and as considered perfectly fair, I’d imagine, by the man on the Clapham omnibus), the company is nonetheless given a zero for its Fair Tax score.

FTM losses

Clearly the company has paid tax at 24% of it’s profits over six years. This is exactly what you would expect as it only achieves overall profitability in 2013 and the tax rate happens to be 24%.

But the FTMRNG declares that the weighted difference is 20.2% Рequivalent to treating the  company as if it had paid a rate of tax of 6.5% on its profits.

The obvious solution to this problem of bad maths, which the Fair Tax Mark campaign endorses (see Thorntons Fair Tax company report), is to completely ignore the Fair Tax Mark campaigns’ workings.

It is nice to know that the campaign knows that their method produces bunkum, but you have to wonder why they insist on using it at all.

 

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About Ben Saunders

I'm a Chartered Tax Adviser and a freelance writer. This is my personal blog about, well, mainly taxation. I might put other stuff in. Who knows.
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