Essential reading: Senate debates tax loophole, Treasury official is skeptical of imminent tax reform
Good day and welcome to the top tax and accounting headlines from Reuters and other news sources.
* A tax loophole opposed by conservatives now divides the Senate. Jennifer Steinhauer – The New York Times. Republicans took to the Senate floor Tuesday to denounce a bill proposed by Democrats that would freeze student loan rates by closing a loophole that allows wealthy individuals to avoid paying Social Security and Medicare taxes on some of their income. The bill would pay for the $5.9 billion loan rate freeze by preventing individuals with incomes exceeding $250,000 who file their taxes as a small business to avoid paying Social Security and Medicare payroll taxes on some of their income. Democrats have referred to the bill as the Edwards bill, as it targets the tax strategy that former Senator John Edwards was criticized for using. In the past, however, many conservatives have dinged the same tax loophole that Democrats now seek to close. Link to The New York Times.
* No tax reform plan yet: Obama aide. Kim Dixon – Reuters. President Barack Obama’s nominee to be the top tax official at the U.S. Treasury Department said on Tuesday that the administration is not actively working on a plan to revamp the tax code, frustrating some of Obama’s fellow Democrats. “At this point there is no plan that has been developed,” Mark Mazur, Obama’s nominee for Treasury’s top tax job, said at a Senate panel hearing on his confirmation. Tax reform was going to be a tougher slog than it was in 1986, when reform was “revenue neutral,” neither raising nor lowering the overall federal tax take. “We are going to need to modestly increase revenue, unlike in 1986,” Mazur said. Link to Reuters.
* Empire State Building IPO change may help pay tax. Ilaina Jonas – Reuters. The controller of the Empire State Building has offered investors the opportunity to sell some of their shares and relieve some of the expected tax burden if a proposed initial public offering is approved before the end of the year, according to a federal filing on Tuesday. But that may not be enough to help the 2,824 investors pay what could be a tax liability somewhere between $50,000 and more than $100,000 depending on the pricing of the IPO shares and where the investor lives. Link to Reuters.
* U.S. IRS missed billions in ID fraud claims: watchdog. Patrick Temple-West – Reuters. The watchdog for the U.S. Internal Revenue Service said the agency failed to stop the issuance of billions of dollars in fraudulent tax refunds in 2010 to thieves who stole taxpayers’ identities. After checking employment records, the Treasury Inspector General for Tax Administration (TIGTA) said it found more returns may have been sent to tax filers using stolen identities than the IRS initially estimated. Link to Reuters.
* India may hit Vodafone with $3.75 billion tax bill. Dow Jones Newswires. India plans to demand about $3.75 billion in taxes from Vodafone Group PLC if Parliament approves a law to retroactively tax overseas mergers that have an underlying Indian asset, a senior government official said Wednesday. The demand will include basic tax of about $1.48 billion, a penalty of a similar amount and interest charges of about $790 million, R.S. Gujral, secretary at the Department of Revenue in the Ministry of Finance, said on television. Link to The Wall Street Journal.
* Swedish finance minister halts tax proposal. Jens Hansegard – The Wall Street Journal. Sweden’s Finance Minister Anders Borg has decided to stop a much-criticized tax law proposal regarding the taxation of partners in private equity companies, Swedish news agency TT reported Wednesday. The Swedish tax authorities have since 2010 investigated a number of private equity companies and retroactively raised taxes for private equity company partners. The Swedish tax authorities state that carried interest is a performance bonus and thus a form of income, and not capital gains, which incurs a lower tax rate. Link to The Wall Street Journal.
* Minister hits back in charity tax row. Sarah Neville – The Financial Times. A government minister has hit back in a row over plans to limit tax relief on charitable donations, suggesting most of the voluntary sector would be unaffected by the controversy over “the tax affairs of a very small group of rich people”. Nick Hurd, minister for civil society, acknowledged that the proposal to cap tax relief at 50,000 pounds ($80,700), or 25 percent of income if that was higher, was “the elephant in the room”, as the issue threatened to overshadow Tuesday’s government-sponsored “giving summit”. Link to The Financial Times.
($1 = 0.6196 British pounds)