Looking at the front page of his blog today.
We have a description of unitary taxation:
Imagine a Swedish company with 25,000 employees in Sweden, 25,000 employees in France, and five tanned accountants throwing paper aeroplanes in a sweaty booking office in the Cayman Islands.
Now, enter Unitary Tax!
Unitary tax involves taxing multinational corporations according to the real economic substance of where they actually do business.
Where is their workforce based? Where are their assets actually held? In which country do they really make their sales?
Under unitary taxation, France and Sweden would get to tax (almost) half of the corporation’s overall profits at their own tax rates, and only tiny weeny amounts of its profits would be allocated to Cayman to be taxed at its zero percent rate.
OK, that is indeed unitary taxation.
Couple of posts down we have country by country reporting.
It’s often said that tax havens are a part of life and there’s nothing we can do about them. That’s not true, as a new series on the Tax Justice Network’s Tackle Tax Havens web site shows.
Take as an example, one of my favourite topics, which is the fact we simply can’t find out what multinational corporations do in any particular country in which they trade. As Tackle Tax Havens puts it, suppose a U.S. multinational corporation mines natural resources in Africa and sells them in the United States and Europe and it sets up a complex array of subsidiary companies, each with a different name, in tax havens across the world to do this.
In that case that corporation could shift billions in profits to those tax haven subsidiaries, avoiding tax in countries with stronger tax regimes in the process.
When it publishes its annual report, the multinational rolls up all the information from each country – trading, profits, tax payments and so on – into one big lump.
No-one – governments, the public, even investors and shareholders – knows what happened where in that case.
With this piece of accounting trickery, a huge black hole has been created in corporate accounts that the use of tax havens makes doubly impenetrable because no accounts can ever be obtained from those places.
Then enter Country by Country Reporting!
Under country by country reporting, the multinationals would have to break their information down by country of operation – including in each tax haven – so that citizens and authorities can see what the corporations are doing in their countries.
With this single accounting measure, countries, rich and poor, will be able to call multinational companies to account at last.
Countries could tax the companies properly. They could fund the schools, roads and hospitals their citizens need, without having to beg for aid.
That makes country by country reporting a blast of transparency that could change the world.
And indeed, that is country by country reporting.
But the bit that our Amazing My. Murphy has missed. But we shouldn’t be too hard on him, he is after all a retired accountant from Wandsworth, one more used to aiding luvvies claim for their greasepaint than advising governments or major corporations. The bit he has missed.
If you have unitary taxation you do not need country by country reporting. You do not need to know where the profits are made. Because you’re not going to tax the profits where they are made. Instead, you’re going to allocate the profits by formula. In which case you don’t give a damn where they are made: you just look at the headline number in the accounts and apply your formula.
And yes, the tax authorities already do know where your staff and sales are. Because you’re already collecting tax from them (PAYE and VAT respectively) in those jurisdictions.
Ritchie is now proposing a taxation method that makes entirely irrelevant everything he has been campaigning for for the past decade. Ain’t that cute?