Tax Break

Essential Reading: Deductions Romney would target, Buffett Rule politics, more

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

* Romney specifies deductions he would cut. Sara Murray – The Wall Street Journal. In order to offset the 20 percent income tax cut he has proposed for all taxpayers, Romney would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction. He also said he would look to the Department of Education and the Department of Housing and Urban Development for budget cuts. Link

* Q+A: The ‘Buffett Rule,’ a minimum tax on the rich. Kim Dixon and Patrick Temple-West – Reuters. President Barack Obama and congressional Democrats are laying a political trap for Republicans to be sprung on Monday when the U. S. Senate is slated to vote on the proposed “Buffett Rule,” which would slap a minimum tax on the highest-income Americans. Link

* For Americans abroad, taxes just got more complicated. David Jolly – The New York Times. Americans overseas face a new form that will add to the hassle of tax time for many and, critics say, set up the unwary for penalties. The new requirement comes courtesy of the Foreign Account Tax Compliance Act, or FATCA, an effort to crack down on offshore tax evasion by U.S. citizens. Link

* New rules will decimate profits. Steve Johnson – The Financial Times. A tightening of the International Accounting Standards Board’s IAS 19 directive from 2013 will stop companies from padding their earnings statements with anticipated pension fund returns that may never materialize and slash hundreds of millions of euros from the profits of many European companies next year. Link

* Barclays’ tax deals face US scrutiny. Megan Murphy – The Financial Times. Barclays’ controversial tax planning business will come under fresh scrutiny in a U.S. Tax Court in New York today in a suit over Bank of New York Mellon’s use of a Barclays structure that cost the U.S. government more than $1bn in lost tax receipts. Link

Essential reading: Global focus on taxing the rich, tax day crashes, and more

U.S. President Barack Obama arrives to speak about tax fairness and the economy at Florida Atlantic University, April 10, 2012. REUTERS/Kevin Lamarque

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

* Soaking the rich might not be a panacea. Vanessa Houlder – The Financial Times. The super rich are under fire across much of the developed world. U.S. President Barack Obama is on the road this week promoting the “Buffett rule”, a minimum tax on millionaires. In France, François Hollande is proposing a 75 per cent tax rate on the rich. In Britain, George Osborne, chancellor, has expressed shock at evidence showing the scale of tax planning by some of the wealthiest people in the country. Link

*Obama to enlist millionaires in Buffett Rule campaign. Margaret Talev – Bloomberg News. President Barack Obama is intensifying his campaign for higher taxes on top U.S. earners, casting the issue against Republican opposition as one of fairness and support for the middle class. Link

Quality of states’ internal audits varies widely

Mississippi steamboat REUTERS/Robert Galbraith

On March 20 the Center for Public Integrity published a project that had been more than a year in the works. Its ambitious goal: to evaluate each of the 50 states on 13 different measures of integrity.  Campaign finance law, judicial accountability and lobbying disclosure were some of the important topics tackled.

Also among the 13: the quality of each state’s internal auditing.

Internal auditing “tends to be overlooked, obscure and isolated.  But these are really key agencies of accountability,” said Nathaniel Heller, executive director of Global Integrity, an affiliate of the Center that helped design the study.

The Center describes itself as a non-partisan nonprofit that concentrates on ethics and public service, and though critics sometimes describe it as left-leaning, it has a record of critical review of politicians and policies of both parties.

Essential reading: Islamic finance may enter accounting mainstream, tax pitfalls for fund investors, and more

 

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

 * Geithner swings back at critics of tax and regulatory policy. Damian Palleta – The Wall Street Journal. Treasury Secretary Timothy Geithner sharpened his rebuke of his political and private sector critics on Wednesday, saying many “misread the underlying dynamics of the economy today.” Geithner, in remarks at the Economic Club of Chicago, called out “business lobbyists” and others and said “many have claimed that the basic foundations of American business are in crisis, critically undermined by taxes and regulation.” Link 

* Christie leaning on tax subsidies in hunt for jobs. Charles Bagli – The New York Times. Since taking office in 2010, Republican Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Christie has emphasized that these are prudent measures intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession. The companies often received the tax breaks after they threatened to move to New York or elsewhere. Link  

Essential reading: RBC accused of tax scheme, Groupon hiring more auditors

Around 50 percent of Irish homeowners have boycotted a new tax. Here, an empty and unsold housing development in the village of Keshcarrigan, County Leitrim. REUTERS/Cathal McNaughton Welcome to the top tax and accounting headlines from Reuters and other sources.

*U.S. regulator accuses RBC of massive trading scheme. Alexandra Alper – Reuters. The U.S. futures regulator accused the Royal Bank of Canada of running a “trading scheme of massive proportion” to gain lucrative Canadian tax benefits. The Commodity Futures Trading Commission’s civil lawsuit alleges RBC employees created and managed a “wash trading” strategy in which they improperly coordinated to buy and sell stock futures without taking a position in the market. RBC declined to comment on whether the trades in question were structured to realize Canadian tax credits, as alleged in the lawsuit. Link

*SEC probes Groupon. Shayndi Rice and Jean Eaglesham – The Wall Street Journal. The Securities and Exchange Commission is examining Groupon Inc’s revision of its first set of financial results as a public company, according to a person familiar with the situation. Groupon has hired a second accounting firm, KPMG, in addition to its current accountant Ernst & Young. KPMG’s role is to make Groupon compliant with Sarbanes-Oxley, federal regulations around accounting and disclosures of public companies. In addition, Groupon plans to hire more accounting and finance staff, said a person familiar with the matter. Link

Problems at ChinaCast highlight issues with VIEs and Deloitte’s China challenge

More bad news on Chinese companies trading on U.S. markets came this week as education company ChinaCast announced it faces possible NASDAQ de-listing.

ChinaCast shares some interesting traits with other recent Chinese accounting headline-grabbers: the company is structured as a variable interest entity (VIE), there is a dispute between its (now former) CEO and its auditor, and that auditor is Deloitte.

Deloitte has in the past few weeks resigned from two Hong Kong-traded Chinese clients as well, and remains embroiled in a lawsuit with the Securities and Exchange Commission over the work papers in its audit of software maker Longtop Financial.

Essential tax and accounting reading: Obama wants Romney tax returns, battling over big oil breaks, Japan’s mega sales tax, and more

U.S. President Barack Obama walks past a pumpjack, New Mexico, March 21, 2012. REUTERS/Jason Reed

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

* Obama campaign seeks Romney tax returns. Mark Maremont – The Wall Street Journal. President Barack Obama’s re-election campaign called on Republican front-runner Mitt Romney to release his tax returns dating back to the 1980s, to see if they contain information about an uncommon investment arrangement at his former private-equity firm that may have helped swell his individual retirement account. The request follows a page-one article in The Wall Street Journal on Thursday that recounted how employees at the firm, Bain Capital, were allowed to invest their retirement money in companies the firm acquired, including investing through a special share class that could skyrocket in value in successful deals. Romney’s IRA was valued at between $20.7 million and $101.6 million as of August, according to his financial disclosures. Link

* GOP blocks Obama’s effort to end tax breaks for big oil. Zachary Goldfarb and Brad Plumer – The Washington Post. President Obama on Thursday called on Congress to end tax breaks for oil companies in a populist speech that sought to turn the blame for gas prices nearing $4 a gallon back onto his Republican critics. In fiery, campaign-style remarks delivered from the Rose Garden, Obama told lawmakers that they can “stand with big oil companies, or they can stand with the American people.” Senate Democrats followed by forcing a vote to end tax cuts for the five largest oil companies, which Republicans resoundingly defeated. Link

PCAOB’s debate over auditor rotation moves to Congress

An ambitious reform agenda at the main U.S. auditor watchdog — already under fire from the accounting industry — has now drawn the ire of members of Congress.

At a hearing on Wednesday, members of a House Financial Services subcommittee took aim at the Public Company Accounting Oversight Board, saying some of the items on its agenda, including term limits for audit firms and making its disciplinary proceedings public, would amount to regulatory overreach.

Investor advocates had expected for some time that PCAOB chairman James Doty would be called before Congress to defend his activist agenda. The rotation idea, still in its early stages, would upset some of the accounting industry’s longest-standing client relationships, and the business lobby has pressed Congress to intervene.

Essential tax and accounting reading: Bain’s IRAs, E&Y cleared on Olympus, Biden attacks Romney tax plan, and more

* Germany to agree to tougher Swiss tax deal-paper. Emma Thomasson – Reuters. Germany is set to agree a revised deal with Switzerland on secret offshore accounts that involves higher rates of taxes than originally planned to meet objections from the opposition, a Swiss newspaper reported on Thursday. Citing unnamed sources, the Tages-Anzeiger daily said German state premiers meeting in Berlin on Thursday should sign off on the deal after the opposition Social Democrats (SPD) and Greens apparently accepted Swiss concessions to tighten the agreement. Link

* Panel clears Ernst & Young unit in Olympus scandal. Kana Inagaki – The Wall Street Journal. Closing another chapter in probes into the scandal that rocked Olympus Corp. last year, an independent panel of lawyers and professors on Thursday cleared Ernst & Young ShinNihon LLC of legal responsibility in its audit of the company’s accounts. But the panel also called on the accounting industry to take measures that go beyond existing legal obligations to better spot potential fraud. Ernst & Young ShinNihon commissioned the four-member panel in December after a separate panel appointed by Olympus’ board raised questions over the hand-over process when Ernst & Young took over the auditing of the company from KPMG AZSA LLC in 2009. KPMG AZSA audited Olympus’ accounts from 1974 to 2009. Link

* Cameron hits back over claims of elitism. George Parker – The Financial Times. British Prime Minister David Cameron has attempted to dispel Labour claims that he leads an elitist “out of touch” government, when he declared his love of Cornish pasties, one of the hot foods that will be taxed more under budget value-added tax rules. The comments came after George Osborne announced a Budget measure on takeaway food, putting a 20 per cent VAT charge on food “sold above ambient temperatures” – immediately named a “pasty tax”. Labour has revelled in the government’s discomfort. Link

Essential tax and accounting reading: taxing the rich, MF Global accounting under review, Simpson-Bowles cuts get a vote, tax hike helps New York budget, and more

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles April 14, 2011. REUTERS/Kevin Lamarque

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

* The case for raising top tax rates. Eduardo Porter – The New York Times. The wealthy are feeling defensive about their taxes. Most Americans may think the rich pay too little but, not surprisingly, only 30 percent of the rich agree. More than two-thirds of families earning a quarter of a million dollars a year or more tell Gallup’s pollsters that their taxes are too high. It is true that high-income Americans carry the biggest tax burden. While fewer than 1 in 20 families make more than $200,000, they pay almost half of all federal taxes. However they feel about the tax man, there is a case to be made that they can pay much more. The reason has nothing to do with fairness, justice or ideology. It is about economics and math. Link

* US FASB weighs reform to accounting used by MF Global. Sarah Lynch – Reuters. The U.S. accounting standard-setting board could this year revamp the accounting treatment that MF Global used to mask risky European sovereign debt exposure, an official at the board will tell lawmakers on Wednesday. “Moving forward with this project will involve a series of public education and decision-making meetings and the exposure of a proposed standard for public comment,” said Financial Accounting Standards Board Technical Director Susan Cosper in prepared testimony. Cosper noted that while historically most repo-to-maturity transactions have involved U.S. Treasury securities, the range of instruments involved has broadened over the years to include other debt instruments such as those seen in the MF Global case. Link