Essential tax and accounting reading:Swiss-German tax tensions, India’s retroactive taxes, who gets audited, the “most fraudulent budget in American history,” and more
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Swiss spy charge signals German tax deal trouble. Katie Reid – Reuters. A Swiss decision to pursue German tax inspectors for industrial espionage is a sign of growing tension that could make it hard for both sides to secure parliamentary ratification of a deal preventing Germans dodging tax on their Swiss deposits. While Berlin is trying to tax an estimated 150 billion Swiss francs ($166 billion) hidden by Germans in Swiss accounts, Berne wants to avoid revealing the identities of wealthy customers who are a mainstay of its offshore financial services industry. Link
* California Democrats duel over taxes, budget. Vauhini Vara – The Wall Street Journal. California Gov. Jerry Brown’s proposed ballot measure this fall to raise taxes and restore funding to an array of state programs faces unlikely opposition from a prominent Los Angeles lawyer who supported Brown’s election only 17 months ago. Attorney Molly Munger has proposed a rival ballot issue that also would raise taxes but earmark most of the new revenues for schools. The clash between Munger and Brown highlights the tension within California’s Democrats over how to prioritize spending now that the state is beginning to recover from its fiscal crisis. Link
* Japan in sales-tax battle. Toko Sekiguchi – The Wall Street Journal. While Japanese Prime Minister Yoshihiko Noda’s parliamentary submission of a sales-tax rise bill on Friday brings the premier one step closer to his goal of fiscal reconstruction, opposition from many lawmakers across the political spectrum is likely to make passage of the measure far from smooth. Anti-tax lawmakers within his party may hinder the premier’s attempt to push the tax discussion forward. The fiscally hawkish prime minister reiterated that he has staked his political career on writing into law the two-step national consumption tax increase to 10 percent by 2015. Link
* How to get the IRS to notice you. Andrea Coombes – The Wall Street Journal. The risk of an audit skyrockets for some. Fully 12.5 percent of taxpayers whose income topped $1 million faced an audit. And self-employed people who filed a Schedule C with gross receipts of $100,000 or more faced an audit rate of about 4 percent — four times higher than average taxpayers. Here are seven red flags. Link
* Tax fantasy – The New York Times editorial. Paul Ryan’s big budget problem is that politicians’ most cherished constituencies are big recipients of the most cherished tax breaks. With some 70 percent of an annual $1.1 trillion in tax breaks flowing to the top 20 percent of taxpayers, and 20 percent going to the middle rung, politicians are loath to champion the end of specific tax breaks. What’s needed is a realistic approach, starting with letting the high-end Bush era tax cuts expire at the end of this year and closing blatant loopholes, including the unconscionably low tax rate for private equity partners. Link
* Pink slime economics. Paul Krugman – The New York Times opinion. On Thursday Republicans in the House of Representatives passed what was surely the most fraudulent budget in American history. To make his numbers work Paul Ryan would, by 2022, have to close enough loopholes to yield an extra $700 billion in revenue every year. The truth is that the filler modern food manufacturers add to their products may be disgusting — think pink slime — but it nonetheless has nutritional value. Ryan’s empty promises don’t. Link