The PalArse of Westminster


Exposing the hypocrisy, greed and incompetence of our "respected" elected political "elite".

Friday, 27 April 2012

The John Mann Award for Fuckwittery

Sometimes politicians display such utter fuckwittery that one wonders how it is they even manage to find their way to the "Mother of Parliaments".

Step forward John Mann MP to receive your Fuckwit award, courtesy of my ICAEW chum, Christie Malry:
Labour MP John Mann, a member of the Commons Treasury select committee, said Goldman Sachs should not defer tax payments when it was able to pay now.
"It's morally and ethically wrong. These are people who are at the heart of the problem in the financial world who've paid extraordinary bonuses to their partners and aren't prepared to pay a fair amount of tax. It's pure unadulterated greed."
Oh, FFS! With stupidity this unrestrained, it's a wonder John Mann can tie his shoelaces, let alone get elected as an MP and serve on the Treasury Committee. 

A company's tax bill is determined by tax law. And its reported profits are determined by accounting standards. Big companies report their consolidated profits for all the countries in which they operate.

Now these two sets of rules are different. So it's hardly surprising that sometimes they give different results. 

While some of the differences are about measurement, most of them are about timing. And usually this means the financial reporting numbers are faster to recognise profit than the tax man. The reason for that is to make it more likely that there's cash to pay the tax bill when it arises.

Because the main difference is one of timing, accounting standards force companies to account for these timing differences in their financial statements. And that's where deferred tax comes in. But deferred tax is a pure accounting concept. It's not something that otherwise means anything. 

So John Mann is being a prime fuckwit when he talks about Goldman Sachs deferring their tax bill. The amounts that are reported as deferred tax aren't due. They represent profits in the financial statements that will give rise to a tax bill at some point in the future but don't give rise to one now.
Goldman Sachs might well be able to pay more now. But there is simply no "more" tax bill to pay. Not until the profits reported this year become taxable in future years.

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