Tax Break

Essential tax and accounting reading:GOP tax reform, Apple’s cash moves, Irish increasingly anti-tax, EU financial transaction tax and more

March 20, 2012

Apple CEO Tim Cook REUTERS/Robert Galbraith

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

*  Republican budget plan seeks to play up tax reform. David Lawder, Donna Smith and Richard Cowan – Reuters. A much-anticipated budget plan due on Tuesday from Republicans in the House of Representatives includes sweeping tax reforms that cut rates and pare down individual income tax brackets from six to two – 10 percent and 25 percent. The plan, which aims to deflect potential fallout from controversial Medicare reforms ahead of November elections, also would nearly eliminate taxes on overseas profits and reduce the domestic corporate tax rate to 25 percent. Even though the plan has almost no chance of becoming law, Republican lawmakers believe that focusing on tax reform will draw a stark contrast with Democratic President Barack Obama’s budget plan and be popular with voters. Link


* Amazon growth under threat from sales tax. Barney Jopson – The Financial Times. Amazon faces a growing threat to its sales according to a survey in which 50 percent of shoppers said they would be likely to buy less from the retailer if it were to collect sales tax. In a Citigroup survey, 52 percent of Amazon shoppers who do not currently pay sales tax on the site said having to do so would slightly, moderately or greatly decrease the likelihood of their buying a product from the retailer. Amazon does not collect sales tax in most U.S. states where it does not have a physical presence – but several initiatives are under way to make it start to do so amid criticism by bricks-and-mortar retailers that it exploits a loophole. Link  

* Apple’s move puts spotlight on foreign cash holdings. Maxwell Murphy – The Wall Street Journal. Apple Inc. holds most of its cash overseas. It plans to keep it there. The balance sheets of U.S. companies are increasingly split between domestic and international operations, with the latter often pacing growth and the former handling major discretionary costs such as executive compensation and shareholder payouts. When deciding on its capital allocation plans, Apple CEO Tim Cook said the company focused only on domestic cash because of the taxes associated with repatriating funds from abroad. Last week, Moody’s Investors Service said U.S. nonfinancial companies held $1.24 trillion in cash as of December, up 3 percent from a 2010 record. The firm said 57 percent, or nearly $700 billion, was held overseas. Link  

* Growing antitax movement shows Irish stoicism wearing thin. Douglas Dalby – The New York Times. Throughout the European financial crisis, Ireland has won plaudits for the way it has handled austerity. But growth has stalled here once again, and an incipient tax revolt is being taken as a sign that even this most stoic of nations is becoming fed up. Urged on by promoters of a tax boycott, fully 85 percent of Irish homeowners have yet to pay a $130 property tax that is due on March 31. Link  

* EU official urges unity on financial tax. Matina Stevis – The Wall Street Journal. Efforts to introduce a tax on financial transactions should focus on getting all 27 European Union member states on board, a senior EU official said on Monday. Algirdas Semeta, the EU’s top executive on tax policy, said he believed the EU is ” moving in the direction of political compromise in order to achieve consensus amongst all 27 member states” and dismissed voices calling for those countries willing to go ahead without their reluctant peers. Several EU countries, most notably the U.K., have categorically rejected the transaction tax, with the U.K. saying it would drive financial-sector firms away from the City of London. Link

* The GOP budget and America’s future. Paul Ryan – The Wall Street Journal opinion. Absent reform, government programs designed in the middle of the 20th century cannot fulfill their promises in the 21st century. It is a mathematical and demographic impossibility. And we said so. We assumed there would be some who would distort for political gain our efforts to preserve programs like Medicare. Having been featured in an attack ad literally throwing an elderly woman off a cliff, I can confirm that those assumptions were on the mark. But one year later, we can say with some confidence that the attacks have failed. Courageous Democrats have joined our efforts. And bipartisan opposition to the path of broken promises is growing. Link  

* Obama’s tax hikes threaten a new US recession. Martin Feldstein – The Financial Times. The recent payroll gains and the declining unemployment rate in the United States have raised hopes that the economy will now start growing faster than the tepid 1.7 percent rate of last year. Optimists are expecting growth rates as high as three per cent for this year and next. I hope they are correct. The recession that began in December 2007 was deep and painful and the recovery that began in June 2009 has been slow and grinding in spite of unprecedented fiscal outlays and an even larger monetary stimulus. House prices have continued to fall and housing construction remains dormant because of the Obama administration’s failure to reduce the large number of homeowners whose mortgage debt exceeds the value of their homes. Business investment has been depressed by the anti-business rhetoric and policies of Obama’s government. Link

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