Essential reading: Big 4 China challenge; Luxembourg tax shelters shine in prime time TV
* Risks loom as China orders Big 4 auditors to go local. Kevin Drawbaugh – Reuters. China and the world’s largest audit firms face credibility risks under an order Beijing issued saying the firms must hire more Chinese citizens to manage operations there, analysts said. Thursday’s order follows a string of accounting scandals at Chinese companies listed on U.S. stock markets and amid broader questions about China’s willingness and ability to conform with international business standards and rules. Link to Reuters.
* Watchdog calls foul on IRS whistleblower office. Patrick Temple-West – Reuters. A Republican senator advocating for whistleblowers called on President Barack Obama to “light a fire” under the Internal Revenue Service’s whistleblower office after a new report highlighted concerns about the program. The comments, on Thursday, came shortly after a watchdog for the IRS criticized the agency’s whistleblower program, saying it may produce inaccurate data and that deadline goals are not strong enough. Link to Reuters.
* Panorama to highlight Luxembourg tax role. Vanessa Houlder – The Financial Times. A BBC investigation is set to highlight the role played by Luxembourg in the tax structures of big British companies, in the latest sign of intensifying scrutiny on corporate tax planning. Next Monday’s Panorama is based on confidential documents said to show how companies including GSK, the pharmaceutical group, and Northern and Shell, the media company, used Luxembourg subsidiaries to lend money to their British operations. The investigation is the latest in a series of examinations of big companies’ tax planning which has triggered a public fightback from the CBI, the employers group. Link to The Financial Times.
* Many Americans abroad surprised by tax code’s nasty bite. Brian Knowlton – The New York Times. As Americans abroad chafe under sharply increased U.S. pressure to declare foreign holdings and catch up on back tax filings, one group with tenuous ties to America and the benefits of citizenship is feeling particular pain and unease. After lifetimes abroad, many in this group, whose total size is impossible to estimate, had believed that because exemptions left them owing no U.S. income tax they had no obligation to file returns; many have been tripped up by a requirement that they still declare their foreign bank and financial accounts. Link to The New York Times.
* Jerry Brown submits tax-hike petitions. Marisa Lagos – The San Francisco Chronicle. Gov. Jerry Brown and backers of his tax initiative submitted petitions Thursday to county elections officials they said contain nearly twice the number of signatures needed to qualify for the November ballot, but the governor acknowledged the measure isn’t a cure-all and warned he will unveil “severe” new cuts to state spending next week. Link to The San Francisco Chronicle.
* The case for global accounting. Floyd Norris – The New York Times. Last week, the American government reaffirmed its commitment to common accounting rules, something that Timothy Geithner, the Treasury secretary, has argued was necessary for common global regulation of banks, among other things. Ideally, comparable accounting around the world would make markets more efficient by letting investors compare companies from different countries. But that would be true only if the standards were of high quality and applied in a consistent manner. Link to The New York Times.
* ObamaCare’s killer device tax. Henry Miller – The Wall Street Journal opinion. Medical device manufacturing is one of the nation’s most dynamic and vibrant industries. Yet instead of protecting this paragon of American ingenuity and innovation, the Obama administration and Congress have viewed the industry as a cash cow from which they could milk profits to help pay for the president’s health law. So they added to the Affordable Care Act a 2.3 percent excise tax on medical devices that will take effect at the beginning of 2013. This tax is especially pernicious because it is assessed on sales, not profits. Link to The Wall Street Journal.