Tax Break

Essential reading: Canada v. US, Indonesia and Japan mull tax hikes, and more

April 4, 2012

A hockey player skates on Lake Louise in the Canadian Rocky Mountains REUTERS/Shaun Best

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

* Obama assails Republican budget plan, aims at Romney. Alister Bull – Reuters. President Barack Obama accused Republicans on Tuesday of favoring the rich with a “radical” budget plan that focuses on cutting popular programs, which the White House sees as a potent vote winner for Democrats in this year’s election. The Republican blueprint proposes broad tax reform, including closing loopholes to raise revenue, while advocating a simplification in the tax code and lowering the top tax rate. White House officials said the goal of Obama’s speech was to hammer home a message that if Republicans win in November, their budget is coming to America. Link

* KKR’s Kravis says U.S. tax overhaul needed. Greg Roumeliotis – Reuters. Henry Kravis, the co-chief executive of private equity group KKR & Co LP, said on Tuesday that a reform of the tax system was necessary to jumpstart the U.S. economy. On Monday, one of Kravis’s peers, David Rubenstein, billionaire co-founder of Carlyle Group LP, defended the lower rate of taxation enjoyed by private equity managers, arguing they are merely following the laws that Congress wrote. Kravis, whose net worth as of March 2012 was $4 billion according to Forbes, refrained from making a prediction about the future tax treatment of carried interest and said he tried to keep his firm out of politics. Link

* Dividend stocks may not look so hot next year. Steven Russolillo and Alexandra Scaggs – The Wall Street Journal. Many investors have been touting dividend stocks as a way to play it safe amid the rocky economic recovery. But dividends may not be such a safe bet heading into 2013. You can blame Uncle Sam for that. As a result of the scheduled tax hike for dividends, corporations will be forced to take a hard look at the way they spend extra cash. According to current policy, taxes on dividends paid to individuals would nearly triple in 2013 to 43.5 percent from 15 percent. Link

* Property tax appeals benefit big companies. Jim Nash – The New York Times. In New York State, anyone can contest the assessed value of a property — on which property taxes are based — and, to the distress of local governments statewide, many are doing so at a time when values are falling and companies are looking to save money wherever they can. Filing an annual tax cert appeal is routine for big companies, which typically own large and expensive parcels of land, experts say. Among the corporations that have filed for refunds in New York recently are IBM, Verizon and 7-Eleven. Link

* Indonesia mine export tax aimed at curbing output boom. Reza Thaher and Rebekah Kebede – Reuters. Indonesia is considering a hefty tax on mining exports to stop miners overexploiting resources to beat a 2014 ban on shipments of some unprocessed metals, a senior official said on Wednesday, but the plan may backfire as importers start to look elsewhere for supplies. The proposal to impose a 25 percent export tax on coal and base metals – rising to 50 percent in 2013 – was met with a mix of confusion and skepticism as both producers and buyers across Asia tried to assess it impact. Link

* Japan’s latest austerity trap. The Wall Street Journal editorial. Yoshihiko Noda — Japan’s sixth prime minister in six years — last week submitted legislation to the Diet, staking his political career on the argument that Tokyo needs to double the national sales tax to 10 percent from 5 percent in order to avert a Greek-style fiscal crisis. Japan’s demographics have already pushed social security programs to the government’s biggest outlay, and the Cabinet Office noted recently that doubling the tax won’t plug the deficit by 2020, given current trends in spending. Link

* Canada beats America. The Wall Street Journal editorial. Stephen Harper’s government took power in 2006 and started to cut taxes, trim government employment and clinch free-trade deals. Canada’s corporate tax rate is now 15 percent, compared with America’s 35 percent. Finance Minister Jim Flaherty explained that policies to “raise taxes, increase government spending, and shun new trading opportunities” would “kill jobs, impose crushing deficits, and cripple our economy.” He will not be President Barack Obama’s next Treasury secretary. Canada’s corporate tax rate is now 15 percent, compared with America’s 35 percent. Link

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