Tax Break

Essential reading: Renouncing U.S. citizenship to save on taxes, and more

May 22, 2012

Americans for Tax Reform President Grover Norquist. REUTERS/Jonathan Ernst

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

 

* No comment necessary: Grover Norquist plays the Nazi card. Andrew Rosenthal – The New York Times opinion. Senators Chuck Schumer and Bob Casey introduced legislation last week that would penalize Americans who renounce their citizenship to evade taxes. Grover Norquist, the president of Americans for Tax Reform, had this to say: “I think Schumer can probably find the legislation to do this. It existed in Germany in the 1930s and Rhodesia in the ’70s and in South Africa as well. He probably just plagiarized it and translated it from the original German.” Link

* Ireland-bound Eaton is latest to end U.S. corporate citizenship. Nanette Byrnes – Reuters.
Eaton Corp’s purchase of electrical equipment maker Cooper Industries means another U.S. company will soon leave the United States in favor of relocating its headquarters to a foreign country with sharply lower taxes. In the case of diversified industrial manufacturer Eaton, a complicated corporate structure will allow it to become part of an Irish corporation and enjoy that country’s low 12.5 percent corporate tax rate. Link

* Yahoo to sell Alibaba stake, take hit on taxes. Maxwell Murphy – The Wall Street Journal. Yahoo tried for years to find a tax-efficient way to unlock the value in its partial Alibaba ownership, but ultimately decided to eat the full 38 percent in federal, state and local taxes in order to finalize a deal, CFO Tim Morse said on Monday. Though a tax-free deal eluded Yahoo and Alibaba, the taxable alternative is nonetheless complex, and is designed to incentivize Alibaba’s initial public offering. Link

* Brazil makes new tax cuts to revive economy. Luciana Otoni and Tiago Pariz – Reuters.
Brazil’s government on Monday unveiled a new round of temporary tax cuts worth about $1 billion to boost the struggling automotive sector and other industries in its latest attempt to restore a lost economic boom. Investor jitters about the economy at home and abroad helped send Brazil’s currency to its weakest closing level in three years on Monday. But Finance Minister Guido Mantega said the measures should help revive an economy that has been stagnant since mid-2011, while also providing protection from the debt crisis in the euro zone. Link

* Japan tax hikes can’t wait; BOJ stimulus still needed-OECD. Reuters. Japan should stick to its plan of raising the consumption tax from 2014 or even earlier to demonstrate budget prudence and avert a run-up in borrowing costs, the OECD said, adding that a credible fiscal consolidation plan must be top priority. The Organization for Economic Co-operation and Development also urged the central bank to maintain the zero rate policy and quantitative easing mainly via asset purchases until inflation returns and reaches the Bank of Japan’s target of 1 percent. Link

* IRS widens debt forgiveness program. Patrick Temple-West – Reuters.
More middle-class Americans will be able to work out their debts to the U.S. Internal Revenue Service because of changes in a tax payment forgiveness program, the agency announced on Monday. The “Offer in Compromise” program lets taxpayers negotiate agreements with the IRS to pay less than the full tax owed. The announced changes make the program more flexible for taxpayers, with some people able to pay off their debts faster, according to the IRS. Link

* Would Romney be another Bill Clinton or another George W. Bush? Bruce Bartlett – The New York Times opinion.
The Bill Clinton and George Bush 43 administrations are almost perfect tests of starve-the-beast, tax and spending theory; Clinton raised taxes in 1993, while Bush signed into law seven different major tax cuts, according to a Treasury Department study. If there were any truth whatsoever to starving the beast, we should have seen a rise in spending during the Clinton years and a fall in spending during the Bush years. In fact, we had exactly the opposite results. Link

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