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

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, Amazon.com 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

Essential tax and accounting reading: Another Deloitte China resignation, Volcker backs rotation, Scholastic gets sales tax bill, and more

Former US Federal Reserve Bank Chairman Paul Volker

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

* Deloitte quits second Chinese firm as auditor fears grow. Donny Kwok – Reuters. Deloitte said on Thursday it had quit as auditor for Chinese milk formula products maker Daqing Dairy Holdings Ltd hours after its shares were suspended, the accounting firm’s second resignation from a Hong Kong-listed Chinese company in days. The news has sparked fears this could be the start of a much wider and deep-rooted problem at Chinese companies listed in Hong Kong, after a series of scandals at U.S.-listed mainland companies last year that has unnerved some of the big auditors. The Daqing resignation came a week after Deloitte quit as auditor of Boshiwa International Holdings, which holds the license to make Harry Potter- and Bob the Builder-branded clothes, attracting unwanted attention to one of the Big Four accounting firms. Link

* Volcker backs contentious auditor rotation idea. Dena Aubin and Sarah Lynch – Reuters. Former Federal Reserve Chairman Paul Volcker backed a controversial proposal to impose term-limits for audit firms on Wednesday, saying it would serve as “a powerful incentive to maintain professional discipline.” The proposal would effectively break up business relationships that have existed for years, and it has provoked strong opposition from the accounting industry. Volcker said he understands that the idea of requiring rotation of audit firms every so often makes the firms “uneasy.” But he said his personal experiences, including his deep involvement in probing accounting failures at Arthur Andersen, convince him that this is the right path forward. Link

* Rich would skirt ‘Buffett Rule,’ report shows. John McKinnon – The Wall Street Journal. Millionaires likely would find legal ways to avoid paying higher taxes under President Barack Obama’s proposed “Buffett Rule,” a new congressional estimate finds. Taxpayers’ likely efforts to sidestep the rule’s effects mean it would raise about $47 billion in extra revenue over the next decade, according to a new estimate by the nonpartisan Joint Committee on Taxation. That’s less than some outside experts had expected and a relatively small amount compared with the size of federal budget deficits, which are running at more than $1 trillion a year. Link

Essential tax and accounting reading: GOP budget detailed, EU transfer tax fading, Australia taxes mining, UK and Switzerland settle, and more

A stack reclaimer with a pile of iron ore at the Rio Tinto Parker Point ship loading terminal in western Australia

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

* Republican budget draws election contrast with Obama. David Lawder – Reuters. Paul Ryan’s proposed budget plan would shrink deficits to $3.13 trillion over 10 years – less than half the size of the deficit projected under President Barack Obama’s plan. It would dismantle Obama’s 2010 healthcare reform law and make deep cuts to federal employee pensions and to social programs such as food stamps and the Medicaid healthcare program for the poor. The Ryan plan proposes to grind down public debt as a share of economic output to 63.5 percent by 2021, compared with 76.3 percent under Obama’s plan. It was 67.7 percent at the end of 2011. Link

* UK budget to juggle politics of austerity. Matt Falloon – Reuters. British finance minister George Osborne looks set to divert attention from the country’s limp economy with politically driven tax measures in Wednesday’s budget, aiming to appease both parties in the ruling coalition and keep financial markets onside. He may remove a 50 percent income tax band for the highest earners. The Conservatives say that high a levy is a barrier to aspiration, while the Labour opposition say it is a fair way to spread the pain. To please the Liberal Democrats, the junior coalition partner, Osborne is expected to raise the income tax threshold by more than previously announced to 9,000 pounds ($14,300), which may please some low and middle earners. Link

The IRS as border guard

Paying taxes is about as stressful as the airport body scanner. Now the Senate wants to combine the two.

"The $50,000 check to the IRS in a separate bin, please" (Reuters)

The Senate last week passed a $109 billion highway trust fund reauthorization bill. To help pay for roads and bridges, the Senate is hoping to ferret out big tax dodgers with the threat of nabbing your passport for tax liabilities.

The Senate bill would revoke or deny a passport to anyone who owes $50,000 or more in federal taxes. The government could revoke a passport upon reentry into the United States for such people.

PCAOB panel to debate contentious auditor rotation idea

Tomorrow is day one of the Public Company Accounting Oversight Board’s high-profile gathering of accounting and financial luminaries debating the topic of auditor rotation.

Among the marquee names who will join the discussion: heads of each of the Big Four audit firms, three former SEC chiefs, former Fed Chairman Paul Volcker, and founder of The Vanguard Group John Bogle. On Thursday, a second day will feature top finance executives and audit board chairs from many of the largest U.S. public companies.

Fireworks are likely.

Following an August announcement that the auditor overseer would delve into whether or not to require companies periodically switch their audit firm, the PCAOB has been barraged with over six hundred comment letters on the idea and has extended the time for public comment until April 22.

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

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  

Tax and accounting calendar

Some important events in the week ahead:    Monday, March 19 – Wednesday, March 21  The Institute of Internal Auditors will hold its general audit management conference. in Orlando, Florida.    Monday, March 19 – Friday, March 23 International Accounting Standards Board meeting in London.

Tuesday, March 20  

·         The Senate Finance Committee hearing, “Tax Fraud by Identity Theft, Part 2: Status, Progress, and Potential Solutions” will start at  10 a.m. in Room 215 of the Dirksen Senate Office Building. Testifying will be Steven T. Miller, IRS deputy commissioner for services and enforcement, Ronald A. Cimino, Justice Department deputy assistant attorney general for criminal matters, and National Taxpayer Advocate Nina Olson.

 ·         The House Financial Services Committee has scheduled a hearing on the state of the international financial system that will also begin at  10 a.m. but in Room 2128 of the Rayburn House Office Building. Treasury Secretary Timothy F. Geithner will testify.

Essential reading: Diamond Foods accounting, Swiss turmoil, GOP budget, uncertainty on Indian taxes, UK bonuses, and more

Representative Paul Ryan (R-WI) will submit a GOP budget proposal Tuesday. REUTERS/Joshua Roberts

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

* Seeds of trouble sown at Diamond Foods years ago. Nanette Byrnes, PJ Huffstutter and Mihir Dalal – Reuters. The accounting scandal at snack maker Diamond Foods in recent months may have shocked shareholders and some California walnut farmers. But a number of accounting and industry experts spotted red flags some time before. A close examination of business practices at Diamond Foods points up a number of warning signs, including unusual timing of payments to growers, a leap in profit margins, and volatile inventories and cash flows. The picture that emerges is of a company that for years seemed to push hard on every lever to meet increasingly ambitious earning targets and allowed top executives to pull in big bonuses, according to interviews with former Diamond employees and board members, rivals, suppliers and consultants, in addition to reviews of public and non-public Diamond records. Link

* Baer chairman steps aside, to deal with U.S. probe. Martin de Sa’Pinto and Emma Thomasson – Reuters. The chairman of Swiss private bank Julius Baer will head a special committee dealing with a U.S. tax probe after leaving his current role, underlining the pressure Swiss banks are feeling from claims they helped wealthy Americans dodge taxes. Raymond Baer, a 52-year-old member of the bank’s founding family who has been at the group almost 25 years and served as chairman for nine, will become honorary chairman of the bank as of its next shareholder meeting in April. As part of that new role, he has been elected to chair a special committee overseeing cooperation with U.S. authorities, the bank said on Monday. Link

“Tax” is key issue in Obama healthcare Supreme Court case

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

To be or not to be a tax?

That is the question, wrote Donna Smith of Reuters, in a March 14 piece on the upcoming U.S. Supreme Court case that will test the validity of President Barack Obama’s controversial healthcare system overhaul.

The central issue in the arguments is the money that Americans will have to pay starting in 2014 to the Internal Revenue Service if they fail to obtain medical insurance.

Though the money is going to the IRS, the Obama administration has gone to great lengths to term it a penalty, not a tax.

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

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