Tax Break

Essential tax and accounting reading: Taxing the rich, Germany and the financial transactions tax, global tax dodges, and more

German Chancellor Angela Merkel REUTERS/Thomas Peter Welcome to the top tax and accounting headlines from Reuters and other sources.

* Opposition presses Merkel on transaction tax. Quentin Peel – The Financial Times. Angela Merkel, the German chancellor, is facing growing pressure to accelerate the introduction of a financial transaction tax in Europe, in order to win approval for the eurozone’s new treaty on fiscal discipline in her parliament. Both leading German opposition parties – the Social Democratic party and the Greens – are calling for action on the FTT as the price of their support for the new treaty, signed last week by 25 of the 27 European Union member states. Merkel’s legal advisers say she needs a two-thirds majority in both the German Bundestag, the directly elected parliament, and the Bundesrat, the chamber representing Germany’s 16 federal states, in order to ratify the treaty. That means relying on both the SPD and Greens to back it in both houses of parliament. Merkel and Wolfgang Schäuble, German finance minister, have both said that if an EU tax is not possible, they would be prepared to back it for the 17 eurozone countries. Link

* Swiss amend U.S. tax treaty. Laura Saunders and Goran Mijuk – The Wall Street Journal. The Swiss parliament on Monday amended a tax treaty with the U.S., allowing Washington to more easily identify U.S. taxpayers with undeclared Swiss accounts. The lower house’s approval following the Swiss senate’s backing in December paves the way for the ratification of a tax-information-sharing agreement between the two countries. Lawmakers hope the change also will help end a years-long tax battle and lessen U.S. pressure on some Swiss banks. Under the new treaty, U.S. authorities will be able to ask the Swiss to disclose names of U.S. taxpayers at a bank who exhibit certain “behavioral patterns” indicating tax evasion under U.S. law, such as trying to conceal the ownership of the account through a trust. The U.S. also will be able to request information even from small cantonal banks that, unlike UBS and Credit Suisse Group, don’t do business in the U.S. Link

* U.S. watchdog finds deficiencies in BDO audits. Dena Aubin – Reuters. The U.S. auditing industry watchdog faulted major accounting firm BDO USA LLP on Monday for numerous deficiencies found in some 2010 audit inspections, the latest of several negative reports on U.S. accounting firms. BDO’s auditors failed to identify or address financial misstatements and in some cases failed to get enough evidence to support audit opinions, the Public Company Accounting Oversight Board said in an inspection report. The PCAOB said that in one case, BDO auditors did not properly test fair-value measurements for mortgage-backed securities and other hard-to-value securities. Link

* Tax evaders exploit varying global tax rates: OECD. Lynnley Browning – Reuters. International tax evasion by multinational companies that take advantage of tax-rate disparities among countries is on the rise, according to an international study group. By claiming multiple deductions and generating fake credits, corporations can cancel out taxes owed, said the Paris-based Organization for Economic Cooperation and Development on Monday. In a 25-page report, the OECD said billions of dollars of tax revenues were at risk through aggressive tax planning techniques used by companies to exploit tax rate differentials. Link

* Venture capitalist pioneer talks taxes, tech and Facebook. Janet Morrissey – The New York Times. Frederick R. Adler, the venture capitalist pioneer, said he thinks tax policy will be crucial for the U.S. economy. The so-called Buffett Rule, he said, is a good idea, but he would tweak the criteria. “The upper upper rich haven’t really been taxed properly – people whose net worth is at least $500 million – you have to have more taxation,” he said. Below the $500 million level, tax increases should be graduated. Adler said the all-or-nothing approach on taxation taken by presidential candidates would not work. “I have great respect” for President Barack Obama and Mitt Romney, he said. But he added that they both needed to compromise. “Obama wants to spread the wealth totally, which I think is a mistake, and I think Romney may not allow the taxes to go as high as they should be,” Adler said. Link

Canada warns on Chinese audit problems

Downtown Shanghai in haze. REUTERS/Carlos Barria

Having stirred up controversy in the United States, audit practices at China-based companies now are testing the patience of Canadian regulators.

In a special report, Canada’s audit regulator has come down hard on the quality of audits of Canadian-listed companies with operations in China, while voicing frustration at problems in getting documents.

“In too many instances auditors did not properly apply procedures that would be considered fundamental in Canada,” the Canadian Public Accountability Board said in its report last week.

Essential tax and accounting reading: California’s Facebook tax windfall, Big Four in China, GE’s taxes, and more

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

* California likes Facebook IPO tax possibilities. Vauhini Vara – The Wall Street Journal. California could reap a tax windfall of as much as $2.5 billion from Facebook Inc.’s initial public offering, a state analyst said Monday, in the first official forecast of the IPO’s impact on the cash-strapped state. The offering is forecast to bring in $500 million of income-tax revenue through stock sales in fiscal 2012, ending in June, followed by $1.5 billion in 2013 and $450 million from 2014 to 2016, according to a report from the Legislative Analyst’s Office, a nonpartisan government entity that advises the legislature. Facebook has planned for an IPO this spring. Link 

* Barclays at center of UK tax avoidance clampdown. Steve Slater – Reuters. Barclays Plc said it was the bank at the centre of a clampdown by Britain on two tax avoidance schemes that the government said would close loopholes and raise more than 500 million pounds ($792 million) in tax. Barclays said it notified Britain’s tax office about its plan to buy back its own bonds, on which it and other banks have made hefty profits in recent years. Tax avoidance is legal, but the Treasury said on Monday the scheme and another one were “highly abusive.” Link  

* “Big Four” auditors brace for big changes in China. Rachel Armstrong – Reuters. The Big Four global audit firms, which dominate the Chinese market, are negotiating with Beijing to lessen the impact of forced changes that could mean only accountants with Chinese qualifications can be partners in their audit practices. The overhaul comes at a delicate time for an audit industry reeling from a rash of accounting scandals at Chinese companies. Any reduction in the audit capacity of KPMG, Deloitte, Ernst & Young and PricewaterhouseCoopers (PWC) would increase foreign regulators’ and investors’ concerns about Chinese auditing. Link

Tax and Accounting Calendar

A worker arranges a saree drying after dyeing in a village south of Kolkata REUTERS/Rupak De Chowdhuri

Some events in the week ahead:

Monday, February 27 – Tuesday, February 28
The Practicing Law Institute will sponsor a two-day program in New York featuring speakers from Treasury and the IRS on a number of topics including investment adjustments, accounting issues, Treasury Department developments, inter-company transactions, and tax attributes and consolidation.

Tuesday, February 28

* The Public Company Accounting Oversight Board will hold an open board meeting at its offices at 1666 K Street NW in Washington DC and via web conference to consider proposed standards on related parties, significant unusual transactions and other matters. Starting at 9:30 AM.

Tax and Accounting Calendar

Mary Schapiro, Chairman of the Securities and Exchange Commission REUTERS/Yuri Gripas

Some events in the week ahead:

Tuesday, February 21

The Taxpayer Advocacy Panel Small Business/Self-Employed Decreasing Non-Filers Project Committee telephonic open meeting, 10 a.m. EST.

Tuesday, February 21 – Thursday, February 23

The Tax Executives Institute will sponsor a three-day seminar in San Diego, California, on audits, appeals and tax controversies, covering topics including winning at appeals, international tax controversy and building an effective transfer pricing case. Sheldon M. Kay, deputy chief of IRS Appeals, will be the Tuesday luncheon speaker.

Study supports shareholder vote on auditors

New research lends weight to calls for shareholders to have more say in a company’s choice of an auditor.

Companies that give shareholders a choice  have fewer serious restatements that hurt stock prices, though their audit fees are also higher, the new study found.

Auditor selection has become a hot-button issue. Regulators are considering ways to make auditors more independent of companies and skeptical when checking their financial statements.

Essential tax and accounting news: “dozens” of corporate tax breaks in play, private equity taxation debated around the world, and Swiss banks’ new model

U.S. Treasury Secretary Timothy Geithner testifies before the Senate Finance Committee, February 14, 2012. REUTERS/Yuri Gripas

The top tax and accounting headlines from Reuters and other sources:

* Tentative deal reached to preserve cut in payroll tax. Jennifer Steinhauer – The New York Times. Members of a House-Senate committee charged with extending a payroll tax reduction and providing added unemployment benefits reached a tentative agreement Tuesday evening, with Republicans and Democrats claiming a degree of political victory in a fight with significant election-year implications. One day after House Republican leaders said they would offer a bill to extend the $100 billion payroll tax rollback for millions of working Americans without requiring spending cuts to pay for it, the Congressional negotiators struck a broader deal that would also extend unemployment benefits and prevent a large cut in reimbursements to doctors who accept Medicare. A vote on the measure would most likely happen by Friday. But senior aides warned that negotiators still had to sign off formally on the agreement and that obstacles could surface given the long-running tensions over the measure. Link

* Obama plan would end dozens of business tax breaks-Geithner. Kim Dixon and Rachelle Younglai – Reuters. The Obama administration’s corporate tax reform plan would end “dozens and dozens” of tax breaks, Treasury Secretary Timothy Geithner said on Tuesday as he defended the White House’s election-year call for higher taxes on the wealthy. Within days, the administration intends to unveil a blueprint aimed at eliminating inequities in the corporate tax system and lowering the top rate. Companies, which pay wildly different levels of taxes, are clamoring for a cut in the corporate tax rate – which tops out at 35 percent – but disagree about how to strip out preferences that benefit selected industries. Geithner spoke before the Senate Finance Committee a day after President Barack Obama unveiled a $3.8 trillion budget-and-tax proposal that called for aggressive government spending to boost the economy and higher taxes on the rich. Link

Tax and Accounting Calendar

Treasury Secretary Timothy Geithner speaks with other Cabinet members at the State of the Union address, January 24, 2012. REUTERS/Jason Reed

Some events in the week ahead:

Tuesday, February 14

It’s not likely to be romantic, but the Senate Budget Committee is holding a hearing on President Barack Obama’s proposed budget for fiscal 2013 on Valentine’s Day.

Witnesses are Jeffrey Zients, acting director of the Office of Management and Budget and Treasury Secretary Timothy Geithner

Essential tax and accounting reading: Global accounting push, global tax battle and a vet tax credit

A military veterans hiring event in New York, January 19, 2012. REUTERS/Brendan McDermid

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

* Global accounting reform ups pressure on U.S. to sign up. Huw Jones – Reuters. Plans by the accounting body responsible for global standards to make itself more answerable to the public will put pressure on the United States to sign up or risk losing influence. The International Accounting Standards Board (IASB) has drawn up the standards, which are used by listed companies in over 100 countries, including the European Union. So far the United States has delayed its decision to sign up, under pressure from companies and Congress who say they do not want to cede regulatory sovereignty to a London-based body. But Thursday’s publication by the IASB’s Trustees and Monitoring Board of plans to make themselves more open and accountable in their second decade may push the United States to think again, given the far-reaching impact that accounting rules have on financial markets and investors. Link.

* Pessimism high, Republicans warn of possible expiration of payroll tax cuts. Jennifer Steinhauer – The New York Times. Congressional Republicans said Thursday that negotiations over extending a payroll tax cut were going so poorly that it was possible the tax break – along with added unemployment benefits – could expire at the end of the month. If the benefits are allowed to lapse, it will be a stunning coda to a battle that has lasted months on Capitol Hill over whether and how to extend a two-percentage-point tax break for nearly every working American and to provide additional unemployment benefits for millions more. A temporary agreement forged in December cost Republicans politically and left both parties locked in another round of fights over how to cover the costs. In addition, Republicans are seeking numerous policy changes connected to unemployment benefits – like a mandatory high school equivalency program and possible drug testing for beneficiaries – that Democrats have rejected out of hand. They would also reduce the benefits to 59 weeks, far less than the 79 weeks sought by President Obama. Link.

Former TIAA-CREF head John Biggs supports auditor rotation

John Biggs, a key figure in a 2002 Congressional debate over term limits for public company auditors has thrown his support behind the idea again.

Breathing some life into an idea auditors are trying feverishly to snuff out, retired TIAA-CREF chairman John Biggs has told auditor regulators that public companies should be required to change auditors after 10 years.

His remarks, in a recently posted letter to the Public Company Accounting Oversight Board, are among the few comments the board has received advocating audit firm rotation, a controversial idea vehemently opposed by the accounting and business groups.