Tax Break

Essential reading: How Apple keeps its tax bill low, KPMG inquiry in UK, and more

April 30, 2012

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

* How Apple sidesteps billions in taxes. Charles Duhigg and David Kocieniewski – The New York Times. As it stands, Apple Inc paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies. Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year. Link  

* KPMG faces inquiry over rescue of HBOS. Helia Ebrahimi – The Sunday Telegraph. Accountancy giant KPMG could face a formal investigation by the UK’s accountancy watchdog for its conduct leading up to the rescue of HBOS by Lloyds TSB. HBOS whistleblower and former head of risk, Paul Moore, has referred KPMG to the regulator in a formal complaint. Moore also has written to Treasury select committee chairman Andrew Tyrie, seeking his support. Moore’s complaint comes a week after it emerged that the former head of HBOS’s corporate bank, Peter Cummings, is to fight a seven-figure fine handed out by the Financial Services Authority for his part in the collapse of the bank. Link  

* Amazon seals sales tax deal with Texas. Barney Jopson – The Financial Times. Amazon has struck an unexpected deal with Texas to start collecting sales tax from consumers at the start of July, in a further sign of its readiness to accept a levy that it had long opposed at state level. Under the deal Amazon will invest at least $200 million to build distribution centers in Texas and create at least 2,500 jobs over the next four years while beginning to collect sales tax on July 1. Link  

* US election noise obscures approaching fiscal precipice – Robin Harding – The Financial Times. The path to economic recovery runs along the edge of a fiscal cliff and few countries seem able to walk it without falling off. As 2012 turns into 2013, by political design, the income tax cuts passed by former president George W. Bush will expire, a temporary payroll tax cut will end, and spending cuts worth $1.2 trillion over 10 years will come into effect. This amounts to an overnight fiscal tightening of about 4 percent of gross domestic product. It means an automatic recession unless Congress acts to stop it. Link  

* Sarkozy on defensive in bitter final election battle. Catherine Bremer and Daniel Flynn – Reuters. French President Nicolas Sarkozy called for tougher borders and a stronger national identity on Sunday and accused the left of petty slander as he struggled to catch up with his Socialist rival a week before a presidential runoff. Francois Hollande’s tax-and-spend program seeks to balance the budget in 2017, a year after Sarkozy, who wants to trim labor costs to boost competitiveness. Analysts say that whoever wins, big austerity cuts will be needed in the months ahead. Link  

* A choice, not an echo. Pete Du Pont – The Wall Street Journal opinion. We are in a very serious and close presidential race; Barack Obama and Mitt Romney have very different viewpoints. Individual tax rates are just too high today, and are scheduled to get even higher at the end of the year, so reducing them will help the economy considerably. Romney wants a permanent, across-the-board 20 percent cut in marginal rates, elimination of the death tax, and repeal of the Alternative Minimum Tax. America’s 35 percent corporate income tax rate is one of the highest in the world, and it should be reduced from 35 percent to 25 percent. Link


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