Tax Break

Essential reading: As governor, Romney picked winners and losers, no taxes for Lagarde, and more

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

* As governor, Romney picked winners and losers of his own. Andy Sullivan – Reuters. Massachusetts Gov. Mitt Romney’s June 2006 announcement that drugmaker Bristol-Myers Squibb was moving into his state served as a signature accomplishment. The new facility came with a price tag: Romney and other state officials agreed to $67 million in tax breaks and other inducements to ensure the New York-based company picked Massachusetts over rival states like North Carolina. Romney backed tax breaks for film makers and biotech and medical-device manufacturers. His administration promoted venture capital-style funds that extended loans to start-up companies, some of which subsequently went out of business. Link

* Christine Lagarde, scourge of tax evaders, pays no tax. Kim Willsher – The Guardian. Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged. As she is an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes. Link

* Anti-tax crusader assails report on Republican shift. Patrick Temple-West – Reuters. Anti-tax crusader Grover Norquist, scourge of any and all tax increases, said on Tuesday that a news report questioning the vitality of his “no new taxes” pledge – a vow taken by many Republican politicians – is overblown. Republicans who have not signed the pledge may be in congressional races they are unlikely to win anyway, while other candidates have rules against signing pledges, he said. Link 

* Japan PM, Ozawa still apart on tax, opposition deal beckons. Tetsushi Kajimoto – Reuters. Japanese Prime Minister Yoshihiko Noda edged closer on Wednesday to a possible deal with the opposition to push through his plan to double the sales tax, after party heavyweight Ichiro Ozawa refused to support his signature initiative. Former finance minister Noda has pledged to bring the plan to a vote in the current session of parliament that ends on June 21, and requires masterful maneuvering to get it passed. Link

* ‘Pasty tax’ u-turn signals uncertainty for UK business. Ainsley Thomson – The Wall Street Journal. Following Chancellor of the Exchequer George Osborne’s u-turn, the meat-filled pastry and parked mobile homes have come to symbolize a government that is prepared to reverse a budget measure if it proves unpopular enough. There is also a significant negative side. The u-turn risks undermining one of the central conditions the annual budget statement is meant to foster: certainty. Link

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

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

Essential reading: Ernst & Young no longer lobbying for companies it had audited, and more

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

* Ernst, audit clients cut lobbying ties-records. David Ingram and Dena Aubin – Reuters. Ernst & Young’s lobbying unit is no longer listed as a lobbyist for three major U.S. companies, all of whom were 2011 audit clients of the accounting giant. The deregistration follows questions raised by two U.S. senators in March about whether the dual relationships crossed auditor independence boundaries. Documents filed last month with Congress showed that Washington Council Ernst & Young, the E&Y unit, was no longer registered as doing lobbying work for Amgen Inc, CVS Caremark Corp and Verizon Communications Inc. Link

* House Democrats plan to pounce again on GOP budget. Ed O’Keefe – The Washington Post. House Democrats plan to attack the spending plan next week as the GOP-controlled House votes on a budget reconciliation package that includes cuts to replace automatic, across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized another $1.2 trillion in cuts over the next decade, with roughly half of the money coming from defense spending. Link

Essential reading: Microsoft’s Nevada tax break, debating Apple’s tax rate, and more

A rainbow appears over hotels on the Las Vegas Strip in Las Vegas, Nevada, REUTERS/Ethan Miller

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

* Microsoft heads to Nevada again for tax perks. Maxwell Murphy – The Wall Street Journal. Microsoft’s $300 million investment in Barnes & Noble’s digital reading and college bookstore operations, announced on Monday, offers another peek into the way companies use Nevada as a way to shelter income from taxes. Microsoft formed Morrison Investment Holdings as a Nevada corporation on April 5, adding to the list of dozens of Microsoft investment subsidiaries incorporated in Nevada, rather than in its home state of Washington, over at least the past two decades. Nevada doesn’t tax corporate income or capital gains. Link

* Apple’s tax rate: 9.8 percent? Hayley Tsukayama – The Washington Post. A weekend story from the New York Times shared a surprising statistic: Apple paid just $3.3 billion on $34.2 billion of profits last year — giving it a tax rate of just 9.8 percent. The 9.8 percent figure, reported earlier by the Greenlining Institute, may be based on the wrong calculations for Apple’s tax share. In its own tax filings, Apple reported these tax rate figures paid in the last three years: “approximately 24.2 percent, 24.4 percent and 31.8 percent for 2011, 2010 and 2009, respectively.” Link

Essential reading: Looking for tax money to fund a student loan break, WIN America shuts down, more

A student studies on the campus of San Francisco State University in San Francisco, California REUTERS/Robert Galbraith

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

* ‘Loophole’ closing eyed to fund student loan policy. Carol Lee and John McKinnon – The Wall Street Journal. The White House and Senate Democrats are looking at ending a tax provision benefiting some small business owners to pay for a year-long extension of a freeze in student loan interest rates, which are scheduled to double from 3.4 percent to 6.8 percent this summer, people familiar with the discussions said. The measure would change a feature of tax law that critics say has allowed many owners of small businesses—particularly those known as Subchapter S corporations—to escape employment taxes on much of their earnings. Link

* SEC charges SinoTech, execs with lying to investors. Sarah Lynch – Reuters. U.S. securities regulators charged China-based SinoTech Energy Ltd and its senior executives with misleading investors on Monday, part of an effort to crack down on accounting problems at Chinese companies listed in the United States. The Securities and Exchange Commission’s civil suit, filed in a U.S. district court in Louisiana, alleges that the oil field services company and its executives “continuously and intentionally misled investors” about the value of its assets and how it used the $120 million in proceeds from its November 2010 initial public offering. Link

Congressional report: small business tax break impact “so small as to be incalculable”

In what our colleague Kim Dixon termed “an escalating election-year war of words over taxes” the Republican-controlled House of Representatives has passed a 20 percent tax break for small businesses, that will likely face the same fate as the Buffet tax Democratic senators voted for earlier in the week: death in the other party’s chamber.

Democrats opposed to the tax blasted it as favoring small businesses that are also tremendously profitable. Steven Dennis wrote in Roll Call that it looked like businesses like the New York Giants football team, which employs 210 people but is worth $1.3 billion, according to Forbes, could qualify for the tax break.

But former presidential advisor Bruce Bartlett, who worked in the first Bush administration and for Ronald Regan, argues with the deeper premise – the axiom that small businesses are the drivers of job creation.
He lays out the argument in a New York Times Economix post from earlier this week:

Tax and accounting calendar

Some important upcoming events in the tax and accounting world:

Monday, April 16 - U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 after March 18, 2010 must report information about those accounts under FACTA using form 8938, or face stiff penalties.

Tuesday, April  17 -

    Tax day in the United States. Individual income tax returns and gift tax returns due. Tax-writing U.S. House of Representatives Committee on Ways and Means will hold a hearing on possible reforms to certain tax-favored retirement savings plans including employer-sponsored defined contribution plans and Individual Retirement Accounts (“IRAs”) that might be considered as part of comprehensive tax reform.  10 am, Room 1100 of the Longworth House Office Building.

Tuesday, April 17 – Friday, April 20 – International Accounting Standards Board meeting in London.

Tuesday, April 17 – Thursday, April 19 – The International Financial Reporting Standards (IFRS) Foundation, the World Bank and OHADA (The Organization for the Harmonization of Corporate Law in Africa) will run a workshop in the West African city of Douala, Cameroon, to support adoption of IFRS.

Essential reading:Empire State IPO tax, bankers find opportunity in tax haven crackdown

     

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

 

 * Empire state owners go ape over IPO tax issue. Craig Karmin – The Wall Street Journal. The fight over the proposed Empire State Building public offering has moved to a new battleground: a spat between small investors and the Malkin family over taxes arising from the iconic skyscraper’s coming listing. The tax bill from the initial public offering could more than wipe out any cash many of the 2,800 investors would initially receive from the sale, according to filings with the U.S. Securities and Exchange Commission. The Malkins would be allowed to defer some of their tax and could be reimbursed about $83 million for other tax liabilities, the filings say. Link  

* Labour challenges Osborne over his tax. Jim Pickard – The Financial Times. U.K. Chancellor George Osborne has been challenged by the Labour party to clarify whether he will benefit personally from next year’s cut in the top rate of income tax despite having said last month he was “not personally affected” by the move. When the chancellor announced the cut from 50 percent to 45 percent for those earning 150,000 pounds ($237,500)– to start next April – he prompted questions about whether it would benefit any senior ministers. Link  

* Tax haven crackdown creates opportunities for bankers. Mark Scott – The New York Times. As regulators clamp down on money flows around the globe, governments, even those that prided themselves on the strength of their secrecy laws, like Switzerland, are facing pressure to share banking information and change their policies. Now, private banks and wealth managers are scrambling to convert so-called black money — assets that have not been disclosed — into accounts that are above board. The shift may provide opportunities for the industry. As more funds become legitimate, analysts say financial institutions will be able to sell extra wealth management products to affluent people and enter markets that had previously been off limits. Link  

Essential reading: Canada v. US, Indonesia and Japan mull tax hikes, and more

A hockey player skates on Lake Louise in the Canadian Rocky Mountains REUTERS/Shaun Best

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

* Obama assails Republican budget plan, aims at Romney. Alister Bull – Reuters. President Barack Obama accused Republicans on Tuesday of favoring the rich with a “radical” budget plan that focuses on cutting popular programs, which the White House sees as a potent vote winner for Democrats in this year’s election. The Republican blueprint proposes broad tax reform, including closing loopholes to raise revenue, while advocating a simplification in the tax code and lowering the top tax rate. White House officials said the goal of Obama’s speech was to hammer home a message that if Republicans win in November, their budget is coming to America. Link

* KKR’s Kravis says U.S. tax overhaul needed. Greg Roumeliotis – Reuters. Henry Kravis, the co-chief executive of private equity group KKR & Co LP, said on Tuesday that a reform of the tax system was necessary to jumpstart the U.S. economy. On Monday, one of Kravis’s peers, David Rubenstein, billionaire co-founder of Carlyle Group LP, defended the lower rate of taxation enjoyed by private equity managers, arguing they are merely following the laws that Congress wrote. Kravis, whose net worth as of March 2012 was $4 billion according to Forbes, refrained from making a prediction about the future tax treatment of carried interest and said he tried to keep his firm out of politics. Link

Tax and accounting calendar

Some important upcoming events in the tax and accounting world:

Sunday, April 1 – Tuesday, April 3 – Council of Institutional Investors annual meeting in Washington, D.C.. Speakers include Hewlett-Packard CEO Meg Whitman, SEC Commissioner Troy Paredes, New York Attorney General Eric Schneiderman, and Chinese accounting critic Carson Block, among others.

Tuesday, April 3 -

    The IRS will hold a hearing on the allocation of interest expense by companies with a significant investment in a partnership, or which use the fair market value method. Starts at 10 a.m. in the IRS Auditorium in Washington. The Urban Institute is sponsoring a Washington event, also being webcast, entitled “Are There Too Many Nonprofits?”

Thursday, April 5 –

    A luncheon at the National Press Club in Washington will feature IRS Commissioner Douglas Shulman speaking on the future of the U.S. tax system and the IRS. The University of San Diego School of Law will sponsor a one-hour tax lecture by lawyer Leslie B. Samuels, a former Treasury Department and OECD official, on “Tax Reform in Today’s Fiscal Environment: Principles to Guide the Debate.”