Tax Break

Essential tax and accounting reading: Taxing the rich, Germany and the financial transactions tax, global tax dodges, and more

March 6, 2012

German Chancellor Angela Merkel REUTERS/Thomas Peter

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

* Opposition presses Merkel on transaction tax. Quentin Peel – The Financial Times. Angela Merkel, the German chancellor, is facing growing pressure to accelerate the introduction of a financial transaction tax in Europe, in order to win approval for the eurozone’s new treaty on fiscal discipline in her parliament. Both leading German opposition parties – the Social Democratic party and the Greens – are calling for action on the FTT as the price of their support for the new treaty, signed last week by 25 of the 27 European Union member states. Merkel’s legal advisers say she needs a two-thirds majority in both the German Bundestag, the directly elected parliament, and the Bundesrat, the chamber representing Germany’s 16 federal states, in order to ratify the treaty. That means relying on both the SPD and Greens to back it in both houses of parliament. Merkel and Wolfgang Schäuble, German finance minister, have both said that if an EU tax is not possible, they would be prepared to back it for the 17 eurozone countries. Link

* Swiss amend U.S. tax treaty. Laura Saunders and Goran Mijuk – The Wall Street Journal. The Swiss parliament on Monday amended a tax treaty with the U.S., allowing Washington to more easily identify U.S. taxpayers with undeclared Swiss accounts. The lower house’s approval following the Swiss senate’s backing in December paves the way for the ratification of a tax-information-sharing agreement between the two countries. Lawmakers hope the change also will help end a years-long tax battle and lessen U.S. pressure on some Swiss banks. Under the new treaty, U.S. authorities will be able to ask the Swiss to disclose names of U.S. taxpayers at a bank who exhibit certain “behavioral patterns” indicating tax evasion under U.S. law, such as trying to conceal the ownership of the account through a trust. The U.S. also will be able to request information even from small cantonal banks that, unlike UBS and Credit Suisse Group, don’t do business in the U.S. Link

* U.S. watchdog finds deficiencies in BDO audits. Dena Aubin – Reuters. The U.S. auditing industry watchdog faulted major accounting firm BDO USA LLP on Monday for numerous deficiencies found in some 2010 audit inspections, the latest of several negative reports on U.S. accounting firms. BDO’s auditors failed to identify or address financial misstatements and in some cases failed to get enough evidence to support audit opinions, the Public Company Accounting Oversight Board said in an inspection report. The PCAOB said that in one case, BDO auditors did not properly test fair-value measurements for mortgage-backed securities and other hard-to-value securities. Link

* Tax evaders exploit varying global tax rates: OECD. Lynnley Browning – Reuters. International tax evasion by multinational companies that take advantage of tax-rate disparities among countries is on the rise, according to an international study group. By claiming multiple deductions and generating fake credits, corporations can cancel out taxes owed, said the Paris-based Organization for Economic Cooperation and Development on Monday. In a 25-page report, the OECD said billions of dollars of tax revenues were at risk through aggressive tax planning techniques used by companies to exploit tax rate differentials. Link

* Venture capitalist pioneer talks taxes, tech and Facebook. Janet Morrissey – The New York Times. Frederick R. Adler, the venture capitalist pioneer, said he thinks tax policy will be crucial for the U.S. economy. The so-called Buffett Rule, he said, is a good idea, but he would tweak the criteria. “The upper upper rich haven’t really been taxed properly – people whose net worth is at least $500 million – you have to have more taxation,” he said. Below the $500 million level, tax increases should be graduated. Adler said the all-or-nothing approach on taxation taken by presidential candidates would not work. “I have great respect” for President Barack Obama and Mitt Romney, he said. But he added that they both needed to compromise. “Obama wants to spread the wealth totally, which I think is a mistake, and I think Romney may not allow the taxes to go as high as they should be,” Adler said. Link

* China to focus on tax reforms in 2012-finance minister – Reuters. China will focus on improving its tax system and lowering structural taxes in its 2012 fiscal policy, which would be kept “pro-active”, Finance Minister Xie Xuren said on Tuesday. Chinese leaders say they want to improve the country’s tax system to lower the tax burden on smaller companies and help them cope with rising operating costs. Link

* Fanning the flames of class warfare. Bruce Bartlett – The New York Times opinion. A curious phenomenon occurs during every economic crisis – the rich whine that they are the ones who are suffering most. While obviously one’s capacity to suffer under any circumstances is subjective, when we hear that the very well-to-do, under any reasonable definition of the term, seek pity, it comes across as callous and clueless. A January poll from the Pew Research Center shows that two-thirds of Americans see strong conflict between the rich and the poor, up from 47 percent in 2009. And a number of polls show that Americans support higher tax rates on millionaires by a ratio of 2-to-1 or more. President Barack Obama is clearly preparing for a debate on the growing inequality of wealth and income. In a January speech, Alan Krueger, chairman of the Council of Economic Advisers, laid out the White House argument. The Republican nominee is going to have a hard time responding if all he has to say is the rich need more tax cuts to compensate them for all their suffering during the economic crisis. Link

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