Tax Break

Essential tax and accounting reading: PCAOB and U.S. Chamber clash on auditor rotation, IRS auditing rich more, Amazon’s taxing times, missing parts of Ryan’s plan, and more

March 23, 2012

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

* Top watchdog, U.S. Chamber clash on auditor rotation. Dean Aubin – Reuters. At a forum on whether corporations should be required by regulation to switch auditors every few years, Public Company Accounting Oversight Board Chairman James Doty clashed with the U.S. Chamber of Commerce. The chamber had written the PCAOB urging it to withdraw a white paper that it issued asking for public comment on auditor rotation. Doty said that the PCAOB has been looking at other ways of improving audit quality at the two-day forum. He suggested it was important for the PCAOB to look into rotation so it could have input on an issue being considered in other countries. Link

* IRS audit rate jumps for U.S. millionaires. Reuters. U.S. tax officials are looking more closely at the tax filings of multimillionaire earners, with the audit rate for those making more than $10 million a year jumping in 2011, according to newly released documents. The Internal Revenue Service audited about 30 percent of the returns of those with adjusted gross income of $10 million or more in 2011, according to statistics released on Thursday. By contrast, in 2010, the agency audited about 18 percent of that group. Link

* UK’s Osborne takes heat over budget’s ‘Granny Tax.’ Cassell Bryan-Low and Nicholas Winning – The Wall Street Journal. UK Chancellor of the Exchequer George Osborne faced a public backlash on Thursday as his budget — pitched as a determined move to fix the economy through austerity — instead was assailed as pandering to the rich while hitting pensioners with what was quickly dubbed a “granny tax.” The budget spat began Wednesday, when Osborne included a provision dropping the country’s top personal income-tax rate to 45 percent from 50 percent for those who earn more than 150,000 pounds ($198,600) annually. At the same time, the budget included a measure freezing a threshold above which people pay income taxes, which will result in slightly higher payments for some pensioners over time. Link

* Amazon faces taxing times. Justin Lahart – The Wall Street Journal. For years, battled against efforts to make online retailers collect sales taxes. Now that it has yielded, investors may learn why it fought so hard for so long. With state and local budgets strapped, and Main Street merchants increasingly irate over being treated like showrooms by customers who then buy from online competitors, the political winds shifted against Amazon. More states have begun looking for workarounds that would allow them to tax online sales. After agreeing last year to begin collecting sales tax in California starting in September, Amazon got behind a Senate bill that would enable state and local governments to collect out-of-state sales taxes from online retailers. The day when any state can tax online sales now seems less a matter of if, but when. Link 

* Paul Ryan’s budget plan: Dessert first, vegetables later. Ruth Marcus – The Washington Post opinion. Everyone agrees that tax reform is a good idea, and the first half of that equation is simple enough. Paul Ryan’s numbers are 10 and 25. The new framework proposes collapsing the current six tax brackets (top rate, 35 percent) into two, with rates of 10 percent and 25 percent. Ryan would also lower the corporate tax from 35 percent to 25 percent — all, he says, without losing any revenue. Sounds great, right? But the second half of the tax reform equation is the tricky part, which helps explain why the appealing precision of Ryan’s tax brackets is not matched by any detail about what loopholes he would close. Link

* Tax policy: Much talk few details. Floyd Norris – The New York Times. Paul Ryan was very clear on how much he wanted to lower rates, and seemed to hint that he would preserve one tax break: lower rates for unearned income including capital gains and dividends. But he is silent on what special tax breaks he would actually eliminate. That is a common problem with Republican proposals this year. One fact you won’t hear much of this year is that tax collections now are well below historic averages — and even below what Ryan says they should be over the long term. Much of that is because of the economy, but the reality is that the government needs to collect more money, and taxing the rich is not going to be enough. Link

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