Tax Break

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

* Dividend stocks may not look so hot next year. Steven Russolillo and Alexandra Scaggs – The Wall Street Journal. Many investors have been touting dividend stocks as a way to play it safe amid the rocky economic recovery. But dividends may not be such a safe bet heading into 2013. You can blame Uncle Sam for that. As a result of the scheduled tax hike for dividends, corporations will be forced to take a hard look at the way they spend extra cash. According to current policy, taxes on dividends paid to individuals would nearly triple in 2013 to 43.5 percent from 15 percent. Link

* Property tax appeals benefit big companies. Jim Nash – The New York Times. In New York State, anyone can contest the assessed value of a property — on which property taxes are based — and, to the distress of local governments statewide, many are doing so at a time when values are falling and companies are looking to save money wherever they can. Filing an annual tax cert appeal is routine for big companies, which typically own large and expensive parcels of land, experts say. Among the corporations that have filed for refunds in New York recently are IBM, Verizon and 7-Eleven. 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

Essential tax and accounting reading:Swiss-German tax tensions, India’s retroactive taxes, who gets audited, the “most fraudulent budget in American history,” and more

A boat on Lake Untersee near the Swiss-German border. REUTERS/Arnd Wiegmann
Welcome to the top tax and accounting headlines from Reuters and other sources.
* Swiss spy charge signals German tax deal trouble. Katie Reid – Reuters. A Swiss decision to pursue German tax inspectors for industrial espionage is a sign of growing tension that could make it hard for both sides to secure parliamentary ratification of a deal preventing Germans dodging tax on their Swiss deposits. While Berlin is trying to tax an estimated 150 billion Swiss francs ($166 billion) hidden by Germans in Swiss accounts, Berne wants to avoid revealing the identities of wealthy customers who are a mainstay of its offshore financial services industry. Link   * Global business groups warn India over tax plan impact. Henry Foy – Reuters. International trade groups representing more than 250,000 companies have warned Indian Prime Minister Manmohan Singh that new taxation proposals by his government have led foreign businesses to reconsider their investments. India’s federal budget last month outlined proposals that would allow authorities to make retroactive tax claims on overseas deals and bring in new anti-tax-avoidance measures, moves that have been criticized for further denting investor sentiment towards India. Link  

* California Democrats duel over taxes, budget. Vauhini Vara – The Wall Street Journal. California Gov. Jerry Brown’s proposed ballot measure this fall to raise taxes and restore funding to an array of state programs faces unlikely opposition from a prominent Los Angeles lawyer who supported Brown’s election only 17 months ago. Attorney Molly Munger has proposed a rival ballot issue that also would raise taxes but earmark most of the new revenues for schools. The clash between Munger and Brown highlights the tension within California’s Democrats over how to prioritize spending now that the state is beginning to recover from its fiscal crisis. Link  

* Japan in sales-tax battle. Toko Sekiguchi – The Wall Street Journal. While Japanese Prime Minister Yoshihiko Noda’s parliamentary submission of a sales-tax rise bill on Friday brings the premier one step closer to his goal of fiscal reconstruction, opposition from many lawmakers across the political spectrum is likely to make passage of the measure far from smooth. Anti-tax lawmakers within his party may hinder the premier’s attempt to push the tax discussion forward. The fiscally hawkish prime minister reiterated that he has staked his political career on writing into law the two-step national consumption tax increase to 10 percent by 2015. Link

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

Tax and accounting calendar

U.S. President Barack Obama greets U.S. Supreme Court Justices Anthony Kennedy (C) and Ruth Bader Ginsburg (R) prior to his State of the Union address, January 24, 2012. REUTERS/Saul Loeb/Pool

Some important upcoming events in the tax and accounting world: Saturday, March 25 – Wednesday, March 28 - Tax Executives International three-day conference in Washington, D.C.
Monday, March 26 – The first of three days of oral argument the  U.S. Supreme Court will hear on the Obama administration’s healthcare reform. Argument today is  focused on the Anti-Injunction Act, which dates to 1867, and whether taxpayers must actually begin paying the penalty for not purchasing insurance before objections to the mandate can be raised in court. Argument starts at 10 a.m.
Tuesday, March 27 –

    The Subcommittee on Energy, Natural Resources and Infrastructure will hold a hearing on renewable tax incentives and whether they have affected the renewable energy industry at 2:45 p.m. The House Appropriations Financial Services and General Government Subcommittee will hold a hearing on President Barack Obama’s proposed 2013 budget for the Treasury Department. Treasury Secretary Timothy F. Geithner will testify. Starts at 10 a.m. Day two of the U.S. Supreme Court review of the Obama healthcare reform. Argument is scheduled for 10 a.m. and will address whether Congress overstepped its powers under the Constitution by adopting the individual mandate. This is the issue at the heart of the legal battle over the law that aims to provide health coverage to more than 30 million uninsured Americans.
Wednesday, March 28 -
    On the third and final day of U.S. Supreme Court oral argument on the Patient Protection and Affordable Care Act, a first session will begin at 10 a.m. focused on whether the entire law must fall if the insurance mandate was found to be unconstitutional, or if the other parts can survive. At 1 p.m. a second session will tackle whether Congress had the authority to require that states expand the number of people eligible for assistance from the Medicaid healthcare program for the poor and disabled. The House Financial Services committee will hold a hearing on accounting and auditing oversight at 10 a.m. The Public Company Accounting Oversight Board’s investor advisory group will meet in Washington to discuss an array of topics including independence, going concern warnings,  and others. 
Thursday, March 29 -
    Government Accounting Standards Board teleconference. The D.C. Bar will sponsor a luncheon program on temporary and proposed Treasury regulations on certain dividend equivalent payments. IRS official Peter Merkel and Treasury official Karl Walli will speak.

Thursday, March 29 – Friday, March 30 - The American Bar Association  and others are sponsoring a two-day conference in Vienna, Austria, on tax planning strategies in the U.S. and Europe, including discussions of cross-border losses in tax planning, tax risk management by multinationals, transfer pricing, and collective investment vehicles.

Essential tax and accounting reading: PCAOB and U.S. Chamber clash on auditor rotation, IRS auditing rich more, Amazon’s taxing times, missing parts of Ryan’s plan, and more

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

* Top watchdog, U.S. Chamber clash on auditor rotation. Dean Aubin – Reuters. At a forum on whether corporations should be required by regulation to switch auditors every few years, Public Company Accounting Oversight Board Chairman James Doty clashed with the U.S. Chamber of Commerce. The chamber had written the PCAOB urging it to withdraw a white paper that it issued asking for public comment on auditor rotation. Doty said that the PCAOB has been looking at other ways of improving audit quality at the two-day forum. He suggested it was important for the PCAOB to look into rotation so it could have input on an issue being considered in other countries. Link

* IRS audit rate jumps for U.S. millionaires. Reuters. U.S. tax officials are looking more closely at the tax filings of multimillionaire earners, with the audit rate for those making more than $10 million a year jumping in 2011, according to newly released documents. The Internal Revenue Service audited about 30 percent of the returns of those with adjusted gross income of $10 million or more in 2011, according to statistics released on Thursday. By contrast, in 2010, the agency audited about 18 percent of that group. Link

* UK’s Osborne takes heat over budget’s ‘Granny Tax.’ Cassell Bryan-Low and Nicholas Winning – The Wall Street Journal. UK Chancellor of the Exchequer George Osborne faced a public backlash on Thursday as his budget — pitched as a determined move to fix the economy through austerity — instead was assailed as pandering to the rich while hitting pensioners with what was quickly dubbed a “granny tax.” The budget spat began Wednesday, when Osborne included a provision dropping the country’s top personal income-tax rate to 45 percent from 50 percent for those who earn more than 150,000 pounds ($198,600) annually. At the same time, the budget included a measure freezing a threshold above which people pay income taxes, which will result in slightly higher payments for some pensioners over time. Link

Essential tax and accounting reading: Another Deloitte China resignation, Volcker backs rotation, Scholastic gets sales tax bill, and more

Former US Federal Reserve Bank Chairman Paul Volker

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

* Deloitte quits second Chinese firm as auditor fears grow. Donny Kwok – Reuters. Deloitte said on Thursday it had quit as auditor for Chinese milk formula products maker Daqing Dairy Holdings Ltd hours after its shares were suspended, the accounting firm’s second resignation from a Hong Kong-listed Chinese company in days. The news has sparked fears this could be the start of a much wider and deep-rooted problem at Chinese companies listed in Hong Kong, after a series of scandals at U.S.-listed mainland companies last year that has unnerved some of the big auditors. The Daqing resignation came a week after Deloitte quit as auditor of Boshiwa International Holdings, which holds the license to make Harry Potter- and Bob the Builder-branded clothes, attracting unwanted attention to one of the Big Four accounting firms. Link

* Volcker backs contentious auditor rotation idea. Dena Aubin and Sarah Lynch – Reuters. Former Federal Reserve Chairman Paul Volcker backed a controversial proposal to impose term-limits for audit firms on Wednesday, saying it would serve as “a powerful incentive to maintain professional discipline.” The proposal would effectively break up business relationships that have existed for years, and it has provoked strong opposition from the accounting industry. Volcker said he understands that the idea of requiring rotation of audit firms every so often makes the firms “uneasy.” But he said his personal experiences, including his deep involvement in probing accounting failures at Arthur Andersen, convince him that this is the right path forward. Link

* Rich would skirt ‘Buffett Rule,’ report shows. John McKinnon – The Wall Street Journal. Millionaires likely would find legal ways to avoid paying higher taxes under President Barack Obama’s proposed “Buffett Rule,” a new congressional estimate finds. Taxpayers’ likely efforts to sidestep the rule’s effects mean it would raise about $47 billion in extra revenue over the next decade, according to a new estimate by the nonpartisan Joint Committee on Taxation. That’s less than some outside experts had expected and a relatively small amount compared with the size of federal budget deficits, which are running at more than $1 trillion a year. Link

Essential tax and accounting reading: GOP budget detailed, EU transfer tax fading, Australia taxes mining, UK and Switzerland settle, and more

A stack reclaimer with a pile of iron ore at the Rio Tinto Parker Point ship loading terminal in western Australia

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

* Republican budget draws election contrast with Obama. David Lawder – Reuters. Paul Ryan’s proposed budget plan would shrink deficits to $3.13 trillion over 10 years – less than half the size of the deficit projected under President Barack Obama’s plan. It would dismantle Obama’s 2010 healthcare reform law and make deep cuts to federal employee pensions and to social programs such as food stamps and the Medicaid healthcare program for the poor. The Ryan plan proposes to grind down public debt as a share of economic output to 63.5 percent by 2021, compared with 76.3 percent under Obama’s plan. It was 67.7 percent at the end of 2011. Link

* UK budget to juggle politics of austerity. Matt Falloon – Reuters. British finance minister George Osborne looks set to divert attention from the country’s limp economy with politically driven tax measures in Wednesday’s budget, aiming to appease both parties in the ruling coalition and keep financial markets onside. He may remove a 50 percent income tax band for the highest earners. The Conservatives say that high a levy is a barrier to aspiration, while the Labour opposition say it is a fair way to spread the pain. To please the Liberal Democrats, the junior coalition partner, Osborne is expected to raise the income tax threshold by more than previously announced to 9,000 pounds ($14,300), which may please some low and middle earners. Link

Essential tax and accounting reading:GOP tax reform, Apple’s cash moves, Irish increasingly anti-tax, EU financial transaction tax and more

Apple CEO Tim Cook REUTERS/Robert Galbraith

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

*  Republican budget plan seeks to play up tax reform. David Lawder, Donna Smith and Richard Cowan – Reuters. A much-anticipated budget plan due on Tuesday from Republicans in the House of Representatives includes sweeping tax reforms that cut rates and pare down individual income tax brackets from six to two – 10 percent and 25 percent. The plan, which aims to deflect potential fallout from controversial Medicare reforms ahead of November elections, also would nearly eliminate taxes on overseas profits and reduce the domestic corporate tax rate to 25 percent. Even though the plan has almost no chance of becoming law, Republican lawmakers believe that focusing on tax reform will draw a stark contrast with Democratic President Barack Obama’s budget plan and be popular with voters. Link

 

* Amazon growth under threat from sales tax. Barney Jopson – The Financial Times. Amazon faces a growing threat to its sales according to a survey in which 50 percent of shoppers said they would be likely to buy less from the retailer if it were to collect sales tax. In a Citigroup survey, 52 percent of Amazon shoppers who do not currently pay sales tax on the site said having to do so would slightly, moderately or greatly decrease the likelihood of their buying a product from the retailer. Amazon does not collect sales tax in most U.S. states where it does not have a physical presence – but several initiatives are under way to make it start to do so amid criticism by bricks-and-mortar retailers that it exploits a loophole. Link  

Essential reading: Diamond Foods accounting, Swiss turmoil, GOP budget, uncertainty on Indian taxes, UK bonuses, and more

Representative Paul Ryan (R-WI) will submit a GOP budget proposal Tuesday. REUTERS/Joshua Roberts

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

* Seeds of trouble sown at Diamond Foods years ago. Nanette Byrnes, PJ Huffstutter and Mihir Dalal – Reuters. The accounting scandal at snack maker Diamond Foods in recent months may have shocked shareholders and some California walnut farmers. But a number of accounting and industry experts spotted red flags some time before. A close examination of business practices at Diamond Foods points up a number of warning signs, including unusual timing of payments to growers, a leap in profit margins, and volatile inventories and cash flows. The picture that emerges is of a company that for years seemed to push hard on every lever to meet increasingly ambitious earning targets and allowed top executives to pull in big bonuses, according to interviews with former Diamond employees and board members, rivals, suppliers and consultants, in addition to reviews of public and non-public Diamond records. Link

* Baer chairman steps aside, to deal with U.S. probe. Martin de Sa’Pinto and Emma Thomasson – Reuters. The chairman of Swiss private bank Julius Baer will head a special committee dealing with a U.S. tax probe after leaving his current role, underlining the pressure Swiss banks are feeling from claims they helped wealthy Americans dodge taxes. Raymond Baer, a 52-year-old member of the bank’s founding family who has been at the group almost 25 years and served as chairman for nine, will become honorary chairman of the bank as of its next shareholder meeting in April. As part of that new role, he has been elected to chair a special committee overseeing cooperation with U.S. authorities, the bank said on Monday. Link