Essential tax and accounting reading: Global accounting push, global tax battle and a vet tax credit
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Global accounting reform ups pressure on U.S. to sign up. Huw Jones – Reuters. Plans by the accounting body responsible for global standards to make itself more answerable to the public will put pressure on the United States to sign up or risk losing influence. The International Accounting Standards Board (IASB) has drawn up the standards, which are used by listed companies in over 100 countries, including the European Union. So far the United States has delayed its decision to sign up, under pressure from companies and Congress who say they do not want to cede regulatory sovereignty to a London-based body. But Thursday’s publication by the IASB’s Trustees and Monitoring Board of plans to make themselves more open and accountable in their second decade may push the United States to think again, given the far-reaching impact that accounting rules have on financial markets and investors. Link.
* Pessimism high, Republicans warn of possible expiration of payroll tax cuts. Jennifer Steinhauer – The New York Times. Congressional Republicans said Thursday that negotiations over extending a payroll tax cut were going so poorly that it was possible the tax break – along with added unemployment benefits – could expire at the end of the month. If the benefits are allowed to lapse, it will be a stunning coda to a battle that has lasted months on Capitol Hill over whether and how to extend a two-percentage-point tax break for nearly every working American and to provide additional unemployment benefits for millions more. A temporary agreement forged in December cost Republicans politically and left both parties locked in another round of fights over how to cover the costs. In addition, Republicans are seeking numerous policy changes connected to unemployment benefits – like a mandatory high school equivalency program and possible drug testing for beneficiaries – that Democrats have rejected out of hand. They would also reduce the benefits to 59 weeks, far less than the 79 weeks sought by President Obama. Link.
* California tax initiatives test power of populism. Jim Christie – Reuters. California voters this fall may have the chance to answer a question of deep interest to politicians around the United States: will populist appeals to “tax the rich” resonate more than pragmatic arguments for budget-balancing solutions? Governor Jerry Brown, a Democrat, has all but staked his governorship on a tax hike ballot initiative consisting of temporary increases in sales and income taxes. He has positioned the measure as a practical and necessary move to combat chronic budget deficits in a state where spending on schools and other services has already been slashed. By contrast, the California Federation of Teachers (CFT), the smaller of two statewide teachers unions, last week got the green light to pursue its own ballot initiative, the “millionaires tax,” which would sharply increase state income taxes on those with more than $1 million a year in annual income. Link.
* Small companies win a round on taxes. John McKinnon – The Wall Street Journal. Small-business representatives claimed another victory over Washington with an Internal Revenue Service decision to relieve retailers and others of a potential tax-compliance headache. In a letter to the National Federation of Independent Business, the Internal Revenue Service said Wednesday it would not require retailers and others to explain how and why their business income differs from their credit-card receipts, which Congress now is requiring card companies to report separately to the IRS. Small business representatives say the remedy of increased reporting imposes too much paperwork burden on owners. They argue that tax compliance costs already are too high – almost $1,600 per employee for firms with fewer than 20 employees, according to NFIB. Link.
* IRS extends deadline to claim vet credit. Laura Saunders – The Wall Street Journal. The Internal Revenue Service released on Thursday information about how employers can claim the newly expanded tax credit for hiring veterans. It also extended some deadlines for firms claiming the credit. Congress expanded the credit as part of the VOW to Hire Heroes Act of 2011, which was enacted last November. Thursday’s guidance gives employers until June 19, 2012, to complete this paperwork for veterans hired after Nov. 22, 2011, and before May 22, 2012. The credit can be as high as $9,600 per veteran for for-profit businesses. Link.
* Tax policy for manufacturing jobs – carrots or sticks? Peyton Craighill – The Washington Post. In a new Washington Post-ABC News poll, nearly three quarters of the public supports changing tax policy to make it more expensive for businesses to move manufacturing jobs overseas. But the public offers less resounding support – 51 to 44 percent – to giving tax breaks to bring jobs back to the country. In the poll, seven in 10 or more Americans of all partisan stripes support increased taxes on businesses that outsource manufacturing jobs. But the divide is more pronounced for offering tax breaks, especially among proponents and opponents of the tea party political movement. By 55 to 40 percent, tea party supporters would like to see tax cuts for businesses returning manufacturing jobs. Tea party opponents divide 46 to 50 percent in opposition. The most supportive of any demographic group are higher income individuals. By nearly 2 to 1, those with incomes above $75,000 support such tax breaks. Those with lower income divide about evenly. Link.
* The fight against tax evasion. The New York Times editorial. Almost three years after UBS, Switzerland’s biggest bank, paid a $780 million fine for helping Americans evade taxes and agreed to hand over the names of more than 4,500 American account holders, the Swiss banking industry refuses to exit the business of tax evasion. And the Swiss government still insists on protecting it from scrutiny. The United States should not compromise in pursuing the data it needs on American tax cheats. Last week, Swiss banks gave American authorities encrypted data about bank employees who served Americans suspected of tax evasion. But the Swiss government said it would provide the decryption key only if it reached an agreement with the United States. If Switzerland stonewalls, the U.S. Justice Department can indict banks that benefit from tax evasion and seize their assets in the United States, moves that could put them out of business. At some point, the Swiss government will find that result a lot more costly than handing over information on American tax cheats. Link.