Tax Break

Essential tax and accounting reading: a high-profile Deloitte resignation, Tea Party challenges Hatch, UK taxes, capital gains, and more

March 16, 2012

Senator Orrin Hatch (R-UT) REUTERS/Benjamin Myers

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

* Deloitte’s Boshiwa exit a precursor to more China auditor resignations. Rachel Armstrong – Reuters. Deloitte’s resignation as auditor of a Hong Kong-listed childrenswear company this week could be the first in a run of accountant departures from Chinese companies in the coming weeks as the audit season draws to an end. Last year’s spate of accounting scandals at U.S.-listed Chinese companies has made auditors more alert to the risk of financial irregularities and the consequences for them if they’re found to be negligent. It’s during the audit process, which usually finishes at the end of April, that problems come to the surface. Deloitte resigned from Boshiwa International Holdings, which holds the license to make Harry Potter- and Bob the Builder-branded clothes, saying it was not satisfied at the company’s response to questions about some of its transactions. Link  

* Geithner: Economy on the mend, still needs help. Glenn Somerville – Reuters. The economy shows encouraging signs of early expansion but still faces tough challenges that call for measures to create jobs to help restore fiscal sustainability, Treasury Secretary Timothy Geithner said on Thursday. In prepared remarks for delivery to the Economic Club of New York, Geithner said one way to sustain growth momentum was tax reform. The Obama administration is aiming for some tax increases for wealthy Americans, though that is opposed by Republicans. The corporate tax code is “a complex and unfair mess of subsidies…with a very high statutory rate,” he said. Link

* Utah’s Hatch battles Tea Party challengers in Republican caucus. Debbie Hummel – Reuters. Veteran U.S. Senator Orrin Hatch faced what may prove to be the toughest re-election bid of his 36-year tenure, as he battled a challenge on Thursday by two younger Tea Party candidates in Utah’s Republican caucus amid high turnout. Republican voters taking part in the hundreds of caucus meetings throughout Utah on Thursday were selecting 4,000 delegates to represent them at a party convention on April 21. The results will give a first significant sign of Hatch’s re-election prospects, although a clear winner may not emerge until the convention, or later if a run-off vote is needed. Washington-based political action group FreedomWorks, closely aligned with the Tea Party movement, has spent nearly $600,000 to unseat Hatch this year. Link

 * India to tax Vodafone-style deals. Amol Sharma and Shefali Anand – The Wall Street Journal. The Indian government proposed legislation Friday that would allow it to retroactively tax overseas mergers in which an underlying Indian asset is transferred, a move that would override the effect of a recent Supreme Court decision in favor of British telecommunications giant Vodafone Group Plc. If the legislation is enacted, it would deal a major blow to foreign investor sentiment in India, which was buoyed by the court’s earlier verdict. Link

* Osborne weighs 50p tax rate cut to 45p. Kiran Stacey – The Financial Times. UK Chancellor of the Exchequer George Osborne is considering announcing a cut in the 50p top rate of income tax to 45p in his budget next week, after the Liberal Democrats showed willingness to drop their resistance in return for a clampdown on tax avoidance by wealthy people. The issue of the 50p rate, unpopular among Conservatives, was put back on the table after the chancellor said he would make some moves towards what Nick Clegg, the Lib Dem leader, and has been billed a “tycoon tax”. Link

* Tax breaks expected for UK shows. Cassell Bryan-Low – The Wall Street Journal. British producers of “high-end” television shows like “Downton Abbey” are expected to get some tax relief in the government’s new budget coming out next week, according to a person familiar with the matter. The UK government is concerned that Britain is struggling to keep big-budget TV projects in the face of tax competition from abroad. It also sees the export of British entertainment as a way to promote the UK overseas. Link

* Capital gains vs. Ordinary income. Uwe Reinhardt – The New York Times opinion. The writer analyzes an op-ed column in the New York Times earlier this month by Mitt Romney adviser George Mankiw. Why is it so difficult to tax capital gains? “The best approach would be to abolish the distinction between capital gains and ordinary income altogether and desist from using the tax system for any kind of economic or social engineering.” Link 

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