Tax Break

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

* Mobius says India’s proposed tax rules a ‘big mistake.’ Choonsik Yoo – Reuters. India is faltering as an investment destination because of significant policy mistakes, and stock prices there will slide if the nation’s credit rating is cut, according to Mark Mobius, one of the world’s best-known emerging market investors. “The Indian government has been making many many big policy mistakes. The most important of all is the idea of having retroactive taxation,” Mobius, executive chairman of Templeton Emerging Markets Group, told Reuters in a phone interview from the Bahamas. Link

* IRS looking at Chesapeake’s CEO well program-filing. Anna Driver – Reuters. Chesapeake Energy Corp (CHK.N) said on Monday the Internal Revenue Service was reviewing issues related to the company’s perk that grants its chief executive officer a stake in thousands of wells the company drills, according to a regulatory filing. In a filing with the U.S. Securities and Exchange Commission, Chesapeake disclosed “the IRS is reviewing certain issues” related to its Founders Well Participation Program (FWPP) granting CEO Aubrey McClendon the right to take a 2.5 percent interest in every well the company drills. Link

Essential reading: How Apple keeps its tax bill low, KPMG inquiry in UK, and more

   

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

* How Apple sidesteps billions in taxes. Charles Duhigg and David Kocieniewski – The New York Times. As it stands, Apple Inc paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies. Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year. Link  

* KPMG faces inquiry over rescue of HBOS. Helia Ebrahimi – The Sunday Telegraph. Accountancy giant KPMG could face a formal investigation by the UK’s accountancy watchdog for its conduct leading up to the rescue of HBOS by Lloyds TSB. HBOS whistleblower and former head of risk, Paul Moore, has referred KPMG to the regulator in a formal complaint. Moore also has written to Treasury select committee chairman Andrew Tyrie, seeking his support. Moore’s complaint comes a week after it emerged that the former head of HBOS’s corporate bank, Peter Cummings, is to fight a seven-figure fine handed out by the Financial Services Authority for his part in the collapse of the bank. Link  

* Amazon seals sales tax deal with Texas. Barney Jopson – The Financial Times. Amazon has struck an unexpected deal with Texas to start collecting sales tax from consumers at the start of July, in a further sign of its readiness to accept a levy that it had long opposed at state level. Under the deal Amazon will invest at least $200 million to build distribution centers in Texas and create at least 2,500 jobs over the next four years while beginning to collect sales tax on July 1. Link  

Essential reading: H&R Block cuts back, Supreme Court restrains IRS, and more

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

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

* H&R Block to close stores, cut jobs. Jochelle Mendonca – Reuters. H&R Block said the head of its U.S. retail tax services unit resigned, and the top U.S. tax preparer announced another round of store closures and job cuts, as it realigns its business to focus on the fast-growing digital tax market. Separately, the company said the number of tax filings it prepared through April 18, grew 4.5 percent to 22.2 million. Link

* Supreme Court restrains IRS in tax shelter case. Patrick Temple-West – Reuters. The Supreme Court ruled on Wednesday that the Internal Revenue Service took too much time to try to collect back taxes from a business in a tax shelter case, a decision with wider impact for dozens of related cases. The high court said the agency could not use an extended, six-year statute of limitations period. The IRS had said the extended period, an exception from the normal three-year limit, was justified in the case. But the court disagreed with the tax-collecting agency in a 5-4 decision in United States v. Home Concrete & Supply LLC. Link

* French front-runner says he’d seek to renegotiate fiscal treaty if elected. Steven Erlanger and Nicholas Kulish – The New York Times. The front-runner for the French presidency, the Socialist candidate François Hollande, said on Wednesday that if elected he would ask other European leaders to renegotiate a fiscal treaty in order to promote growth. He said he would also call for a financial transaction tax, as his rival, President Nicolas Sarkozy has done. Link

Essential reading: Amazon will collect Nevada sales tax, debating tax cuts, 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.

* Amazon agrees to begin collecting sales taxes in Nevada.  The Wall Street Journal. Amazon.com Inc. has agreed to collect a sales tax on items sold in Nevada beginning in 2014, or earlier should proposed federal legislation mandate that online retailers collect sales taxes. The online retailing giant said it will collect taxes in the same manner as traditional brick-and-mortar retailers, an agreement that is expected to raise at least $16 million a year for the state, according to the Las Vegas Sun, which initially reported the news. Link

* German cabinet approves Swiss tax deal. Madeline Chambers – Reuters. German Chancellor Angela Merkel’s cabinet passed a revised deal to tax secret deposits in Swiss bank accounts on Wednesday, betting that the opposition Social Democrats (SPD) will drop their objections and back the accord in parliament. Switzerland and Germany hammered out the new deal earlier this month after a diplomatic spat that lasted years. Link

Essential reading: Seeking common ground in Washington, shorting India on tax fears, more

A tea vendor holds an umbrella at a roadside in Mumbai. REUTERS/Sima Dubey

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

* In presidential race’s give-and-take, hope for a fiscal compromise. John Harwood – The New York Times. Some elected officials and policy experts see improving odds for 2012 to end up yielding much more, including progress toward a deal on tax and budget issues that have confounded Washington’s divided government. Some say the campaign dialogue could even bring a deal closer. Senator Charles Grassley of Iowa, a member of the Finance Committee, recently urged fellow Republicans to accept Democrats’ demand for some tax increases, as long as Democrats accepted the longstanding argument by conservatives that revenue calculations account for at least some positive effect on economic growth from changes in the tax code. Link 

* Macquarie hedge fund exits short bets in India on tax fears. Nishant Kumar – Reuters. Macquarie’s Asia hedge fund has exited its short positions in Indian single stock futures in response to a controversial set of proposed tax rules that could lower investment returns. Foreign investors have raised concerns on two recent Indian provisions to tax indirect investments and combat tax evasion. Link

* Filmmaker wins case against IRS. Michael Cieply – The New York Times. Documentary filmmakers can breathe a sigh of relief, knowing that the producer and director Lee Storey won her case last week against the commissioner of Internal Revenue in United States Tax Court. The IRS tried to disallow Storey’s deduction of expenses incurred while making and marketing the film “Smile ’Til It Hurts: The Up With People Story.” Link 

Essential reading: U.S. House passes small business tax cut, New York sues Sprint, more

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

* House passes Republican business tax cut. Kim Dixon – Reuters. The Republican-controlled House of Representatives on Thursday passed a tax break for small businesses, giving voters a stark alternative to President Barack Obama’s politically popular “Buffett Rule” surtax on the wealthy. In an escalating election-year war of words over taxes, the Republican measure, like the Buffett Rule, is not expected to become law. It is opposed by Democrats, who control the Senate, where the bill was expected to die. Link

* Olympus eyes fresh start, ex-CEO mulls legal threat. Tim Kelly and Yoko Kubota – Reuters. Shareholders of Olympus Corp approved a new board on Friday, hoping for a fresh start at the camera and medical device maker that hid $1.7 billion of investment losses in Japan’s biggest corporate scandal in decades. While Olympus will hope the vote draws a line under a scandal that has wiped more than $4 billion off its market value, its former CEO and foreign investors, who own 25-30 percent of the company, have sought a change in a deep-rooted culture of cross-shareholdings and cozy ties between banks and boardrooms. Link

* State tax collections pass peak from recession’s start. Michael Cooper – The New York Times. State tax collections, which during the recession  experienced their steepest and longest drop since at least the Great Depression, have been climbing back for the last two years and finally surpassed their previous peaks as 2011 drew to a close, according to a report issued on Thursday. But huge challenges remain, as their populations and the cost of providing services have continued to rise, and the growth in tax collections has begun to soften. Link

Essential reading: UK tax evaders face higher penalty, challenges of fixing U.S. taxes, more

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

* Tax evaders face higher penalty. Vanessa Houlder – The Financial Times. British tax evaders with secret accounts in Switzerland will pay more than originally planned to legitimize their holdings under a revised deal signed on Wednesday. Revenue & Customs demanded that Switzerland increase the maximum one-off penalty to cover former unpaid tax from 34 per cent to 41 per cent, after a similar revision to the Swiss-German tax deal earlier this month. The program is expected to bring in billions of pounds. Link

* US pressure over India tax law. James Politi and James Crabtree – The Financial Times. US business groups are putting pressure on Tim Geithner, the treasury secretary, to intervene to try to stop India from enacting a contentious retroactive taxation law that they argue would have “severe consequences” for American investors in the country. They have asked him to “raise concerns” about the tax bill in talks with Indian officials during the spring meetings of the World Bank and International Monetary Fund this week. Link

* What Hong Kong knows about China. Joseph Sternberg – The Wall Street Journal. In a bit of virtuous contagion, a coughing fit of accounting honesty concerning Chinese companies appears to be spreading from the U.S. to Hong Kong. The earnings season just concluded has seen a mini-spate of delayed accounts. Trading in 13 companies’ shares is currently suspended pending incomplete audits. Link

Essential reading: Americans overseas balk at taxes, trickle-down taxation, more

U.S. Park Police Officer Calvin Covington with his horse Harper mails his family's income tax returns at a mobile post office near the Internal Revenue Service building in downtown Washington. REUTERS/Jonathan

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

* Romney’s remarks on limiting tax deductions draw fire. By Sam Youngman and Donna Smith – Reuters. After Mitt Romney was overheard telling supporters at a private fundraiser in Florida over the weekend that he might seek to limit tax deductions for mortgages and eliminate the Department of Housing and Urban Development (HUD), aides said on Monday that Romney was simply throwing out ideas, not outlining policy to help offset his proposal to slash all U.S. tax rates by 20 percent. Link  

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: 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