Tax Break

Essential reading: Islamic finance may enter accounting mainstream, tax pitfalls for fund investors, and more

April 5, 2012

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

 * Geithner swings back at critics of tax and regulatory policy. Damian Palleta – The Wall Street Journal. Treasury Secretary Timothy Geithner sharpened his rebuke of his political and private sector critics on Wednesday, saying many “misread the underlying dynamics of the economy today.” Geithner, in remarks at the Economic Club of Chicago, called out “business lobbyists” and others and said “many have claimed that the basic foundations of American business are in crisis, critically undermined by taxes and regulation.” Link 

* Christie leaning on tax subsidies in hunt for jobs. Charles Bagli – The New York Times. Since taking office in 2010, Republican Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Christie has emphasized that these are prudent measures intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession. The companies often received the tax breaks after they threatened to move to New York or elsewhere. Link  

* Brazil tightens taxes on commods companies. Luciana Otoni – Reuters. Brazil cracked down on multinational commodities firms on Wednesday with rules to block them from shifting tax liabilities to more favorable countries. The measure by Brazil’s tax authority comes a day after the government granted $5.5 billion in tax breaks aimed largely at domestic manufacturers. Under new rules, the Brazilian units of companies such as Vale, Bunge, Cargill, Louis Dreyfus, Glencore and Noble Group must value transactions with overseas units of the same company using international price benchmarks, said Sandro Serpa. Link

* Germany, Switzerland near tax plan. Andrea Thomas – The Wall Street Journal. Germany and Switzerland will sign a tax deal on Thursday that could generate billions of euros in tax revenues for Germany and end a dispute between the two neighboring countries over tax evasion and bank secrecy. The deal regulates cooperation between Swiss and German tax investigators and is expected to create additional tax revenues from assets that German citizens have stashed in secret Swiss bank accounts. Link  

* Islamic finance pressured to join accounting mainstream. Anjuli Davies – Reuters. Rapid growth of Islamic finance is increasing pressure for the industry to enter the accounting mainstream, by seeking guidance from the International Accounting Standards Board (IASB), the global body which sets the tone for bookkeeping in conventional finance. It would be a controversial move – by basing itself on religious principles, Islamic finance seeks to set itself apart from conventional finance. But some experts think the industry is becoming so big that it can no longer sit comfortably outside a trend towards harmonizing accounting rules across the world. Link  

* Hungary plans financial transaction tax, minister says. Reuters. Hungary’s government plans to introduce a financial transaction tax, Economy Minister Gyorgy Matolcsy wrote in a column in the weekly Heti Valasz published on Thursday. The minister also said he would prefer to have five different sales tax rates, at 5, 15, 20 and 25 percent, and with a top rate of 30 percent raised from the current 27 percent, which is already the highest in the European Union. Link 

* Taiwan stocks at over-2-month closing low on tax woes. Faith Hung – Reuters. Taiwan stocks fell to a more than two-month closing low on Thursday as concerns over government discussions on a possible tax on stock profits compounded worries over the global economy that sent other regional bourses lower. The finance ministry will hold meetings on Thursday and Friday of its tax reform team to discuss whether to levy a capital gains tax. Link  

* Court rejects Essar oil’s plea in tax case. Rakesh Sharma – The Wall Street Journal. Shares of Essar Oil Ltd tanked Wednesday after the Supreme Court of India rejected the refiner’s petition against a January ruling which said it can’t defer sales tax payments to the Gujarat state government. The court’s decision means that Essar, which had asked to be allowed to defer the payments until 2021, will have to make good the full 63 billion rupees ($1.24 billion) sales tax deferment benefit it utilized. Link  

* Tax pitfalls for fund investors. Rachel Louise Ensign – The Wall Street Journal. Fund investors can go wrong in all sorts of ways. But since mid-April is fast approaching, let’s talk about one of the most common and least understood: taxes. At the root of the most common blunders are three types of taxable fund payouts: interest income, dividends and capital gains. While all three are subject to a complex web of tax rates and regulations, investors can limit their tax bills by understanding their funds, planning carefully and staying abreast of tax changes in Washington. Link  

* Camels can pass through a needle’s eye. Desmond Tutu and Betttina Gronblom – The Financial Times. How are we to correct the negative traits of capitalism? A Robin Hood tax, or Tobin tax, has been suggested. Yet there is a risk that such a tax is more likely to hit investors than banks. And it is not yet clear how it would discourage risky behavior by banks. We cannot tax ourselves out of this and hope that this will solve the problem because we are not addressing the root cause of the behavior. We are in self-denial because we are treating the symptoms, not healing the patient. Link 

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