Tax Break

Essential reading: China minister calls for tax changes to boost spending, and more

June 7, 2012

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

* China minister calls for tax changes to boost spending. Liyan Qi – The Wall Street Journal. China needs to improve its tax system to stimulate spending, Finance Minister Xie Xuren said Thursday. The central government will study measures to expand a value-added tax trial, and improve China’s consumption tax to “guide reasonable consumption” more effectively, Mr. Xie said in a statement on the ministry’s website. Link

* Obama stands firm against extending tax cuts for rich. Caren Bohan and Thomas Ferraro – Reuters. President Barack Obama’s Democrats traded shots with Republicans on Wednesday about how best to avoid a year-end “fiscal cliff,” as the administration insisted on the need to let tax cuts for wealthier Americans expire as scheduled on January 1. The prospect of higher taxes and automatic spending cuts that kick in next year have spurred calls for Obama to temporarily extend all of the Bush-era tax breaks to coax Republicans into a sweeping debt deal, but the White House stood firm. Link

* Bill Clinton becomes Romney’s favorite surrogate for Obama. Sam Youngman – Reuters. In the space of five days, Bill Clinton went off message on two important issues – tax cuts and Romney’s time as a private equity executive – raising questions about the former president’s motives. This week, Clinton said he favored a temporary extension of George W. Bush-era tax cuts for all Americans, not just the middle class, as Obama prefers. Link

* Scottish Power tests US tax breaks on interest. Kim Dixon – Reuters. The U.S. Tax Court is expected to issue shortly its first major decision in years on the tax deductibility of interest in certain corporate debt transactions in a case that pits the UK’s Scottish Power against the Internal Revenue Service. The IRS is challenging $932 million in interest deductions taken by the power utility on $4 billion in intercompany notes issued between company units. The tax collector argues that the transactions should be treated as equity, which would nullify the deductions taken by the Spanish-owned company. Link

* Tweaking tax code could spur green energy: senator. Roberta Rampton – Reuters. A freshman Democratic senator thinks he may have found a way to encourage investment in wind, solar and biofuel projects without sapping too many taxpayer dollars or injecting new venom into a bitter partisan battle over energy incentives. Chris Coons will introduce legislation on Thursday that would allow a broad range of renewable power generation and transmission projects to qualify for a tax structure used widely by pipeline and other energy-related companies. Link

* California governor shrugs off tobacco tax defeat. Jim Christie – Reuters. California Governor Jerry Brown said on Wednesday the defeat of a measure proposing a tobacco tax increase in the state’s primary election is not a bad sign for the tax measure he aims to put on the November ballot. The Democratic governor told the San Francisco Chronicle the narrow defeat of the measure on Tuesday reflects how its campaign was simply outspent on advertising by its opponents. Link

* Tax evasion eating into Italian GDP. Christopher Emsden – The Wall Street Journal. More than a quarter of the Italian economy eludes taxation, due to underground and criminal economic activities that push up borrowing costs and discourage investment in the country’s most vulnerable regions, a senior Bank of Italy official said Wednesday. The estimate that 27.4 percent of gross domestic product in the euro zone’s third-largest economy is off the books comes at a time when authorities in the region are contemplating steps toward a fiscal union. Link

* What a Romney recovery might look like. Phil Gramm and Glenn Hubbard – The Wall Street Journal opinion. Mitt Romney champions a reduction in marginal tax rates in the context of a general tax reform. Particularly powerful are his proposals to reduce marginal tax rates on business income earned by corporate and unincorporated businesses alike. Link


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