Tax Break

Essential tax and accounting reading: Politicians and taxes: U.K., French and U.S. editions, NYSE to keep tax break on Grasso pay, Brazilian tax aims to dampen real

March 2, 2012

In Brazil a new tax on loan sales aims to dampen inflation as prices of food and other consumer staples rise. REUTERS/Nacho Doce

Welcome to the top tax and accounting headlines from Reuters and other sources.

* Parsing Santorum’s proposals. Floyd Norris – The New York Times opinion. Election-year tax rhetoric has never been notable for its frankness. A promise to raise someone’s taxes does not seem particularly likely to win that person’s vote, and no one wants to follow in the footsteps of Walter Mondale, the last major-party nominee to propose a general tax increase. But this year has been worse than any campaign I can remember. The most amazing proposal came from Rick Santorum. He would reduce almost everyone’s taxes. He would slash tax rates for all, his campaign Web site promises, while preserving “deductions for charitable giving, home mortgage interest, health care, retirement savings and children.” Link

* NYSE wins dispute over Grasso pay. Jacob Bunge – The Wall Street Journal. The Internal Revenue Service has backed down from efforts to claw back $161 million in tax deductions taken by the New York Stock Exchange linked to the pay of former Chief Executive Richard Grasso. The IRS in late 2009 sought to disallow deductions taken by the Big Board from 2001 to 2003 for compensation paid to Grasso, and two years ago the exchange’s parent NYSE Euronext challenged the U.S. government on the matter. Grasso led the NYSE for eight years and his $187 million pay package sparked outcry when he departed the exchange in 2003. In October 2011 the IRS determined, following an appeal process, that “there was no deficiency in the tax returns filed by NYSE for the years 2001, 2002 and 2003, thereby resolving the matter in favor of the NYSE,” according to documents filed by the exchange group late Wednesday. Link

* Osborne to defy calls to remove 50p tax rate. Jim Pickard – The Financial Times. U.K. chancellor George Osborne is to defy calls for the removal of the 50 percent upper rate on income tax and will instead instigate a clampdown on wealthy homeowners in an attempt to demonstrate that the rich cannot avoid Britain’s austerity programme. The chancellor will target people who avoid paying stamp duty when buying a home and is considering a more extensive tax raid on wealthy owners of central London homes. Among ideas being discussed by Tories is a change in the rule that means non-UK residents are exempt from capital gains tax. Mr Osborne’s aides are also still considering a higher council tax band to hit the most affluent homeowners. Link

* Brazil confirms trade financing loan tax to contain real’s gains. Rogerio Jelmayer and Matthew Cowley – The Wall Street Journal. The Central Bank of Brazil late Thursday confirmed it has imposed a 6 percent tax on trade financing loans with maturities of more than one year, in what market participants consider another step to contain the appreciation of the Brazilian real against the U.S dollar. The bank also said that only importers will be allowed to take out such loans. Link

* Four fiscal phonies. Paul Krugman – The New York Times opinion. Mitt Romney is very concerned about budget deficits. Or at least that’s what he says; he likes to warn that President Obama’s deficits are leading us toward a “Greece-style collapse.” In fact, all four significant Republican presidential candidates still standing are fiscal phonies. Romney, in particular, is asserting that his tax cuts wouldn’t actually explode the deficit because they would promote faster economic growth and this would raise revenue. Meanwhile, the richest 1 percent would receive large tax cuts — and the richest 0.1 percent would do even better, with the average member of this elite group paying $1.1 million a year less in taxes than he or she would if the high-end Bush tax cuts are allowed to expire. Link

* France’s class warrior. The Wall Street Journal opinion. François Hollande, France’s Socialist Party candidate for President, made a campaign stop this week in London, hoping to win over the 300,000 or so of his fellow citizens who now make their home on the other side of the Chunnel. If Mr. Hollande’s proposal to impose a 75 percent tax rate on incomes over 1 million euros ($1.33 million) ever becomes law, he’ll have to get used to many more such visits to Perfidious Albion. Hollande has called his 75 percent rate a matter of “patriotism,” and in one sense he’s right—it would take a very patriotic Frenchman indeed to stay put and pay the levy. French footballers are said to be especially distressed by Hollande’s proposal, which could be good news—for the Premier League. Even Scandinavia could start attracting French tax refugees. Link
($1 = 0.7501 euros)

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