Tax Break

Essential reading: Offshore tax havens’ links to crime, budget choices, and more

May 7, 2012

Tourists walk on Seven Mile Beach at sunset in George Town, Cayman Islands REUTERS/Gary Hershorn

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

* These islands aren’t just a shelter from taxes. Robert Morgenthau – The New York Times opinion. The British Virgin Islands, the Cayman Islands, Gibraltar, Bermuda and the Bahamas – these offshore jurisdictions allow some individuals and corporations to engage in outright tax fraud, costing America at least $40 billion each year. The secrecy laws in these tax havens are at the root of serious crimes: fraud, money laundering and international terrorism. Follow the trail of nearly any major financial scandal and you will enter one or more of these notorious jurisdictions. Link

* House Republicans target social cuts to shield military. David Lawder – Reuters. Republicans in the House of Representatives on Monday will fire their first shots of the next deficit-reduction battle, advancing legislation to cut nearly $380 billion largely from social programs while protecting defense spending. President Barack Obama is likely to consider signing a replacement measure that offers “balance,” meaning spending cuts combined with new revenues such as those proposed in Obama’s February budget plan. But the tax increases for the wealthy proposed by Obama, along with some spending increases, make that budget a non-starter for House Republicans. Link

* Facebook could dodge $14bn in US taxes. Nathalie Thomas – The Telegraph. Facebook has admitted it could dodge paying as much as $14 billion in U.S. corporation tax following its stock market flotation next week. In its latest filing to the U.S. Securities and Exchange Commission, Facebook said if all shares are cashed in before the end of 2012, this would trigger a tax deduction “of approximately $14bn”. Link

* Greek voters punish 2 main parties for collapse. Rachel Donadio and Niki Santonis – The New York Times. Greece was plunged into political uncertainty on Sunday after voters bolstered the far left and neo-Nazi right in a wave of protest that saw the crushing defeat of the dominant political parties they blame for Greece’s economic collapse. With Greece’s gross national product having dropped 20 percent since 2009 and unemployment soaring to 21 percent, fierce opposition to the bailout terms — tax increases and wage cuts — has led to the implosion of the Socialist and New Democracy Parties, and the rise of parties on the right and the left that oppose the loan deal. Link

* India defers implementation of anti-tax-avoidance rules. Mukesh Jagota and Anant Vijay Kala – The Wall Street Journal. The Indian government Monday postponed the implementation of a controversial tax proposal to the next financial year starting April 1, 2013, in an effort to arrest an alarming slide in investor confidence. It also clarified that the responsibility of proving wrongdoing under the General Anti Avoidance Rules will be on the government, rather than on companies. Link

* Tax inquiries of wealthy yield 200 mln pounds. Vanessa Houlder – The Financial Times. The extra tax take from inquiries aimed at some of Britain’s wealthiest individuals rose by nearly a quarter to 200 million pounds ($323.17 million)in 2011-12, in a sign of HM Revenue & Customs’ tougher and more sophisticated approach to tackling avoidance, evasion and errors. The increased compliance yield from HMRC’s high net worth unit, which scrutinizes the affairs of about 5,000 individuals with at least 20 million pounds in wealth, follows a rise in 2010-11 when it brought in 162 million pounds, nearly double the 85 million pounds it raked in its first year in 2009-10. Link

* Socialist France. The Wall Street Journal editorial. For newly-elected French President Francois Hollande, there won’t be enough French millionaires to tax at his proposed 75 percent rate to finance a government that already controls 56 percent of French GDP. Unlike Americans, French citizens can escape their national tax rates if they move elsewhere, so expect another wave of French tax migrants to London. France already has one of the highest overall tax burdens but continues to bleed red ink. Debt is 90 percent of GDP. His best chance for success is to follow the example of the last center-left German Chancellor, Gerhard Schröder, who did a ‘Nixon goes to China’ by selling reform to his coalition. Link

($1 = 0.6189 British pounds)

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