Essential reading: China forces auditors to restructure; veto threat of Republican defense cuts
* China orders “Big Four” auditors to restructure. Koh Gui Qing and Rachel Armstrong – Reuters. The world’s top four accounting firms will have to bring in Chinese citizens to run their operations in China and end the dominance of foreign partners under new rules announced by the Finance Ministry on Thursday. The Big Four auditors – Deloitte, PricewaterhouseCoopers, Ernst & Young and KPMG – must start to convert their practices this August and comply with all the new rules by the end of 2017. The changes come at a difficult time for the Big Four as they grapple with the fall-out from a string of accounting scandals at Chinese companies listed in the United States that has left investors questioning the quality of auditing in China. Link to Reuters.
* Obama threatens to veto Republican’s shield of defense cuts. David Lawder – Reuters. President Barack Obama threatened on Wednesday to veto a Republican bill that would partially replace looming automatic budget cuts and protect military spending at the expense of food stamps and other social programs. The House of Representatives on Thursday is expected to vote on the Republican plan. A Democratic plan would raise revenues by implementing the “Buffett rule”, a new minimum tax rate for those with incomes above $1 million. Ending tax breaks for the five largest large oil producers and cuts to crop subsidies would be the next largest savings contributors. Link to Reuters.
* Reid issues threat on defense cuts. Janet Hook – The Wall Street Journal. Raising the stakes in the congressional budget debate, the Senate’s top Democrat Tuesday threatened to allow deep defense spending cuts to take effect at year’s end unless Republicans were willing to accept a broader budget deal that includes tax increases. Senate Democratic Leader Harry Reid said Democrats would insist on a more “balanced approach” to deficit reduction that includes tax increases, as well as cuts to both domestic and defense programs. Link to The Wall Street Journal.
* EU court says France’s UCITS dividend tax rules breach EU law. Laurence Norman – The Wall Street Journal. French tax rules that slap a 25 percent tax on dividends earned by non-residents from investments in collective investment schemes breach European Union law, the European Court of Justice said in a ruling Thursday. In a case brought by 10 Undertakings for Collective Investment in Transferable Securities, or UCITS, against the French government, the court said the French rules breach the free movement of capital guaranteed by EU law. Link to The Wall Street Journal.
* Vale wins injunction barring Brazil tax debt payment. Guillermo Parra-Bernal and Eduardo Simões – Reuters. Brazil’s highest court suspended on Wednesday the payment of about 24 billion reais ($12.4 billion) in back taxes by mining company Vale, handing the world’s largest iron ore producer a temporary victory in a dispute with the government. Vale is fighting four actions by the Brazilian Federal Revenue Service, which claims the mining firm has avoided paying levies on profits obtained at some of its foreign subsidiaries. Link to Reuters.
* India tax rules still baffle foreign investors. Shefali Anand – The Wall Street Journal. Foreign investors are not convinced by Indian Finance Minister Pranab Mukherjee’s recent attempts to clarify how some proposed tax rule changes would affect them. Earlier this week, Mukherjee announced the government would delay the implementation of the so-called General Anti-Avoidance Rules for taxation by one year. While everyone has welcomed these clarifications, there are plenty of unanswered questions. Link to The Wall Street Journal.