Tax Break

Essential reading: Critics say Chesapeake’s books obscure costs, and more

May 21, 2012

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

* Critics: Chesapeake’s murky books obscure costs. Ben Casselman – The Wall Street Journal. Chesapeake Energy Corp accounts for its exploration and drilling expenses using a method that accounting experts say is generally more aggressive and less transparent than the approach many other big energy companies use. The accounting method is legal and not uncommon. But some critics say it makes it hard to figure out the true costs of Chesapeake’s drilling programs and their success, and forces investors to ferret out the hundreds of millions of dollars Chesapeake is making in interest payments. Link

* Vale president says to fight Swiss tax dispute-paper. Caroline Copley – Reuters.
Brazilian mining company Vale SA has no plans to amicably settle a Swiss tax dispute, its president was quoted as saying in a newspaper on Saturday. Switzerland is demanding that Vale pays five years in back taxes, the Tagesanzeigner newspaper reported earlier this year. “We will fight for our interests, which we consider as legitimate,” Vale SA President Renato Neves told Le Temps in an interview. The paper said Switzerland was demanding Vale pay back 212 million Swiss francs ($224.58 million) in taxes. Link

* Business backs income tax rate of 30 percent. Martin Sandbu – The Financial Times. The Institute of Directors has endorsed a radical proposal that recommends replacing part of the UK tax system with a single income tax rate of 30 percent and reducing the government’s share of the national economy to one-third. The TaxPayers’ Alliance, the pressure group that campaigns for lower taxes, and the IoD, published on Monday their report, “The Single Income Tax”, as part of the 2020 Tax Commission, a joint project. Link

* Minnesota continues centuries old tradition of tax subsidies for stadiums. Norman Chad – The Washington Post. In yet another snub to the cry “No More Stadiums, With or Without Tax Subsidies” Tour, the state of Minnesota — the premier serial subsidizer of the 21st century — is publicly funding much of an almost $1 billion football facility. The city of Saint Paul is still trying to pay off $40 million in loans for the construction of the Xcel Energy Center hockey arena in 2000. Then there’s Target Field, the Twins’ baseball stadium opened in 2010, a $522 million project that included $392 million in public subsidies. Link

* The Saverin lesson – The Wall Street Journal opinion.
Democratic Senators Chuck Schumer and Bob Casey pounced on the news by announcing Thursday that they will introduce a plan to tax capital gains at 30 percent for any wealthy Americans who try to escape from U.S. shores. No doubt they hope to score political points by punishing the fleeing rich who will strike most Americans as unpatriotic, but the senators are doing far more harm than Eduardo Saverin is to the United States and its global reputation. Link

* Edward Lazear: Three views of the ‘Fiscal Cliff.’ The Wall Street Journal opinion.
The evidence suggests that we should move away from worry over the impending “fiscal cliff” and focus more heavily on concern about raising taxes. Economists David and Christina Romer have warned an increase in taxes of 1 percent of gross domestic product lowers GDP by almost 3 percent. The evidence on government spending also suggests that high spending means lower growth. Link

* ‘Tax the rich’ the opposite of reform. George Skelton – The Los Angeles Times.
Gov. Jerry Brown defends his soak-the-rich tax proposal as just. And besides, he says, it’s popular with the non-rich. Never mind that it would make California’s roller-coaster tax system even more volatile. We are too dependent on the rich and their capital gains. Unlike the federal government, California treats capital gains as ordinary income. Link

* The tax reform Britain needs. Matthew Sinclair – The Wall Street Journal opinion.
To change things we need a tax system that is much simpler and more honest. Your house doesn’t pay property taxes, your car doesn’t pay gas taxes and we should stop pretending businesses pay corporate taxes. Those taxes are paid by shareholders in lower dividends, workers in lower pay and customers in higher prices. There should be a single tax on labor and capital income at a single proportionate rate: the Single Income Tax. Link

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