Tax Break

Essential tax and accounting reading: a high-profile Deloitte resignation, Tea Party challenges Hatch, UK taxes, capital gains, and more

Senator Orrin Hatch (R-UT) REUTERS/Benjamin Myers

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

* Deloitte’s Boshiwa exit a precursor to more China auditor resignations. Rachel Armstrong – Reuters. Deloitte’s resignation as auditor of a Hong Kong-listed childrenswear company this week could be the first in a run of accountant departures from Chinese companies in the coming weeks as the audit season draws to an end. Last year’s spate of accounting scandals at U.S.-listed Chinese companies has made auditors more alert to the risk of financial irregularities and the consequences for them if they’re found to be negligent. It’s during the audit process, which usually finishes at the end of April, that problems come to the surface. Deloitte resigned from Boshiwa International Holdings, which holds the license to make Harry Potter- and Bob the Builder-branded clothes, saying it was not satisfied at the company’s response to questions about some of its transactions. Link  

* Geithner: Economy on the mend, still needs help. Glenn Somerville – Reuters. The economy shows encouraging signs of early expansion but still faces tough challenges that call for measures to create jobs to help restore fiscal sustainability, Treasury Secretary Timothy Geithner said on Thursday. In prepared remarks for delivery to the Economic Club of New York, Geithner said one way to sustain growth momentum was tax reform. The Obama administration is aiming for some tax increases for wealthy Americans, though that is opposed by Republicans. The corporate tax code is “a complex and unfair mess of subsidies…with a very high statutory rate,” he said. Link

* Utah’s Hatch battles Tea Party challengers in Republican caucus. Debbie Hummel – Reuters. Veteran U.S. Senator Orrin Hatch faced what may prove to be the toughest re-election bid of his 36-year tenure, as he battled a challenge on Thursday by two younger Tea Party candidates in Utah’s Republican caucus amid high turnout. Republican voters taking part in the hundreds of caucus meetings throughout Utah on Thursday were selecting 4,000 delegates to represent them at a party convention on April 21. The results will give a first significant sign of Hatch’s re-election prospects, although a clear winner may not emerge until the convention, or later if a run-off vote is needed. Washington-based political action group FreedomWorks, closely aligned with the Tea Party movement, has spent nearly $600,000 to unseat Hatch this year. Link

 * India to tax Vodafone-style deals. Amol Sharma and Shefali Anand – The Wall Street Journal. The Indian government proposed legislation Friday that would allow it to retroactively tax overseas mergers in which an underlying Indian asset is transferred, a move that would override the effect of a recent Supreme Court decision in favor of British telecommunications giant Vodafone Group Plc. If the legislation is enacted, it would deal a major blow to foreign investor sentiment in India, which was buoyed by the court’s earlier verdict. Link

Essential tax and accounting reading: UK tax probe of eBay sellers, Swiss advisers, public transit subsidy, and more

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

* Senate backs return of higher transit subsidy. Eric Yoder – The Washington Post. The maximum tax-free subsidy that employers can pay for their workers to use public transit in their commuting would nearly double to $240 a month under a provision in the transportation bill the Senate passed Wednesday. The maximum had been $230 a month in 2009-2011 under a series of temporary laws, but when a further extension wasn’t passed by the end of last year, the amount reverted to its previous level of $125 a month. Meanwhile, a subsidy for parking at commuter lots to take public transportation rose from $230 to $240 a month due to an inflation adjustment. Link

* Two Swiss financial advisers accused of helping U.S. taxpayers hide money. Lynnley Browning – Reuters. Prosecutors in New York on Wednesday indicted two Swiss financial advisers, one a former private banker at financial giant UBS AG, on charges of conspiring to help wealthy Americans hide $267 million in secret bank accounts. In separate indictments, one of them alleging that a child was used to carry cash to a client, charges were brought against Hans Thomann, 61, and Josef Beck, 46. Both live in Switzerland, but they worked separately from each other. Link  

* Tax probe on eBay sellers comes under fire. Vanessa Houlder – The Financial Times. The UK revenue agency’s approach to tackling evasion risks “missing the bigger picture,” advisers said on Wednesday after it launched a targeted campaign aimed at eBay traders. Gary Ashford of the Chartered Institute of Taxation, a professional body, said launching campaigns aimed at specific groups every few weeks was confusing and risked diluting the anti-evasion message. The institute called on Inland Revenue to focus its efforts on a one-off national campaign open to all taxpayers whose affairs were not up to date. Link  

Essential tax and accounting reading: European carbon and tycoon taxes face headwinds, better outlook for Japanese sales tax, audit red flags, and more

Japan's Mount Fuji REUTERS/Toru Hanai

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

* Whistleblower Joseph Insinga suing IRS for not being paid a reward. Lisa Rein – The Washington Post. Joseph A. Insinga was the ultimate whistleblower. The former executive with a Dutch bank says he divulged to the Internal Revenue Service details about how for years his employer helped U.S. companies dodge taxes. Now Insinga is taking tax authorities to court for failing to give him a reward that he says he is owed by the federal government. Insinga filed a whistleblower claim with the IRS in 2007, a year after Congress passed a law to help the government uncover tax cheats by encouraging informants to come forward. Those with inside information could receive up to 15 to 30 percent of any taxes, fines, penalties and interest the IRS collected from a taxpayer who was illegally sheltering taxes, usually a corporation. Insinga says he is entitled to a portion of the money the IRS collected from the taxpayers he exposed. He’s confident that at least one company, and maybe more, was forced to pay taxes based on his information. He had alleged that Rabobank Group, where he worked as an executive for more than a decade, helped seven companies avoid hundreds of millions of dollars in taxes through offshore partnerships and other corporate schemes. Link

* Delay EU carbon levy, says air industry. Peter Marsh, Joshua Chaffin and Simon Rabinovitch – The Financial Times. Seven of Europe’s leading aviation companies have joined forces to warn that the European Union’s plans to charge for carbon pollution are jeopardizing 2,000 jobs and billions of dollars of orders from China. Airbus and six large European airlines said the plan to bring global airlines into the EU emissions trading scheme for carbon dioxide, which the industry has steadfastly opposed, is creating an “intolerable” threat to the European aviation industry by opening up the possibility of trade battles with China, the US and Russia. The EU’s plan to regulate the output of carbon dioxide, as part of the effort to combat global warming, has stirred concern in the European aviation industry. Airbus – which employs more than 50,000 people across Europe – argues the proposals will damage competitiveness at a time of economic weakness, wants the EU to “put on hold” the extension of the scheme to airlines until a global plan for regulating carbon emissions by airlines can be agreed. Link

* Clegg forced to go soft on ‘tycoon tax’ Kiran Stacey, Helen Warrell and Vanessa Houlder – The Financial Times. Nick Clegg has been forced to soften proposals for a “tycoon tax” less than 48 hours after announcing it as a flagship policy at his Liberal Democrat party’s spring conference. The deputy prime minister said on Saturday that he wanted to set a minimum effective tax rate, making sure high earners did not use various loopholes to pay less than 20 per cent of their income in tax. The Treasury was surprised by Mr Clegg’s explicit mention of a minimum tax rate, as they had expected his speech to focus on general anti-avoidance measures. People close to George Osborne, the chancellor, told the Financial Times a minimum rate was not being considered. Link

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

Essential tax and accounting reading: U.S. corporate income taxes hit a low, British tax shelters, Japan’s sales tax, taxing wealth around the world, and more

Francois Hollande, Socialist Party candidate for the 2012 French presidential election REUTERS/Jacky NaegelenWelcome to the top tax and accounting headlines from Reuters and other sources.

* U.S. corporate tax rates hit 10-year low. Telis Demos – The Financial Times. The effective tax rate paid by large U.S. public companies fell to its lowest in a decade in the fourth quarter last year as an increasing amount of revenue was generated outside of the country. According to figures compiled by Morgan Stanley, the unweighted average tax rate paid by the largest 1,500 U.S. public companies by market value in the fourth quarter was 31.9 percent of pre-tax income. About 100 companies are yet to report for the quarter. That puts the period on track for the lowest average in any quarter since 2001 and off sharply from the 35.4 per cent paid a year ago. Link

* Companies assess risks of tax planning. Vanessa Houlder – The Financial Times. Businesses are scrambling to assess the reputational risks of tax planning, after the closure of two “highly abusive” schemes designed by Barclays demonstrated the increasing public scrutiny of big companies’ tax affairs. The Treasury moved aggressively last week to block the bank from exploiting a loophole that could have cost the exchequer 500 million pounds ($792.80 million), marking the latest in a series of high-profile corporate tax disputes. Experts say the cases show how tax has joined executive pay at the forefront of debate over “responsible capitalism,” putting pressure on both the government and companies to demonstrate that businesses are paying their fair share. Link

Essential tax and accounting reading: Politicians and taxes: U.K., French and U.S. editions, NYSE to keep tax break on Grasso pay, Brazilian tax aims to dampen real

In Brazil a new tax on loan sales aims to dampen inflation as prices of food and other consumer staples rise. REUTERS/Nacho Doce

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

* Parsing Santorum’s proposals. Floyd Norris – The New York Times opinion. Election-year tax rhetoric has never been notable for its frankness. A promise to raise someone’s taxes does not seem particularly likely to win that person’s vote, and no one wants to follow in the footsteps of Walter Mondale, the last major-party nominee to propose a general tax increase. But this year has been worse than any campaign I can remember. The most amazing proposal came from Rick Santorum. He would reduce almost everyone’s taxes. He would slash tax rates for all, his campaign Web site promises, while preserving “deductions for charitable giving, home mortgage interest, health care, retirement savings and children.” Link

* NYSE wins dispute over Grasso pay. Jacob Bunge – The Wall Street Journal. The Internal Revenue Service has backed down from efforts to claw back $161 million in tax deductions taken by the New York Stock Exchange linked to the pay of former Chief Executive Richard Grasso. The IRS in late 2009 sought to disallow deductions taken by the Big Board from 2001 to 2003 for compensation paid to Grasso, and two years ago the exchange’s parent NYSE Euronext challenged the U.S. government on the matter. Grasso led the NYSE for eight years and his $187 million pay package sparked outcry when he departed the exchange in 2003. In October 2011 the IRS determined, following an appeal process, that “there was no deficiency in the tax returns filed by NYSE for the years 2001, 2002 and 2003, thereby resolving the matter in favor of the NYSE,” according to documents filed by the exchange group late Wednesday. Link

Essential tax and accounting reading: Romney’s plan questioned, planning for a dividend tax hike, Transocean’s transfer pricing, unhappy California, and big taxes in Spain

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

* Investors gird for higher dividend taxes. Arden Dale – The Wall Street Journal. Financial advisers and their clients are starting to plan for, if not yet act on, a possible jump in taxes on dividends. Dividend-producing stocks have had a special attraction among investors in recent years, in part because of the lower-than-usual tax rates dividends have enjoyed for much of the past decade. Those low rates gained even more luster as the stock market tanked — driving up the dividend yields — while interest rates on savings accounts have been so low. A 2 percent dividend yield also looks more interesting to investors than it did before U.S. bond yields declined last year and remain near historical lows. Increases in taxes on dividends, capital gains and ordinary income all are currently planned, but dividends may be seeing one of the biggest changes. Link  

 * Credibility of Romney’s big tax cut questioned. James Politi and Richard McGregor – The Financial Times. Mitt Romney’s latest tax-cut proposals would result in $3.4 trillion in foregone revenue for the federal government, with revenues stuck at the very low level of 16 percent of gross domestic product for the next decade, according to a study by an independent think-tank. The calculations by the Tax Policy Center will raise questions about the fiscal rectitude of Romney’s economic plan at a time when the former Massachusetts governor is vowing to slash US budget deficits. Link  

Essential tax and accounting reading: Barclay’s tax schemes, GM’s tax break, Swiss compromise, and a 75 percent French tax

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

* Swiss lawmakers set for tax plan vote. Katherina Bart – Reuters. Swiss lawmakers are set to back a tax proposal with the United States on Wednesday in a move which could pave the way for Switzerland to settle a U.S. probe into Swiss banks and hidden offshore accounts. The lower house will vote on a proposal clarifying how Switzerland would hand over data on Americans suspected of dodging taxes at home. The proposal, which passed the upper house in December, seeks to backstop an expected deal over U.S. probes into 11 banks including Credit Suisse and Julius Baer. Link

* French front-runner pledges 75 percent tax bracket. Gabriele Parussini – The Wall Street Journal. French presidential front-runner François Hollande said taxpayers earning over 1 million euros ($1.34 million)a year would be subjected to a special 75 percent tax bracket should he be elected, underscoring heightened interest across Europe in raising taxes on the wealthiest individuals. Speaking on French television late Monday, the Socialist candidate lamented the “considerable increase” in French corporate executives’ pay, which he put at €2 million a year on average. His proposal caused an uproar in the ruling UMP party, and surprised even Hollande’s own advisers. President Nicolas Sarkozy pointed to the “appalling amateurism” of his opponent’s proposals. Link

* Barclays’ tax plans clash with sentiment. Megan Murphy, Sharlene Goff and Vanessa Houlder – The Financial Times. Has Barclays’ attempt to avoid more than 500 million pounds ($791.93 million) in UK tax dealt a lasting blow to the bank’s nascent efforts to put better citizenship at the heart of a new feel-good corporate agenda? The British Revenue & Customs’ announcement that it has closed down two “highly abusive” schemes designed by the bank has thrust Barclays’ tax practices back into the spotlight, at a time when the bank is trying to rebuild its reputation with politicians and the public. Barclays’ insiders say they are genuinely shocked by the government’s announcement, emphasising that both schemes had been signed off by the bank’s professional advisers and were voluntarily disclosed. Link

Essential tax and accounting reading: Pushing a U.S. tax overhaul, Germans volunteering to sort out Greek taxes, Santorum’s plan, and more

U.S. Republican presidential candidate Rick Santorum addresses supporters during a campaign stop in Michigan. REUTERS/Rebecca Cook

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

* Tangled tax code primed for pruning. John McKinnon – The Wall Street Journal. President Barack Obama’s business-tax-overhaul plan underscores the growing likelihood of a serious effort to revamp the nation’s much-criticized tax system, no matter who wins the White House. The question now isn’t whether a tax rewrite will happen, but how far it will go, and whether it will stop at business rules or also extend to individuals. Increasingly the answer appears to be that the entire tax code, all 70,000 pages, could be in play. Powerful dynamics are reducing the significance of partisan differences. One is the expiration of Bush tax breaks at the end of 2012. A broad tax overhaul could give each party a way to break the cycle of short-term tax extensions that is frustrating businesses and individuals. Another is the government’s grim fiscal situation. Many Democrats and even some Republicans see a streamlined tax system as a way to generate more revenue. Link

* Plans for US manufacturing may yield more votes than jobs. Andy Sullivan – Reuters. U.S. factories are hiring again, and Democratic President Barack Obama and some of his Republican rivals are pitching tax breaks to fuel a rebound in manufacturing and help rebuild a battered middle class. Economists on the left and the right say promises to bring back factory work may yield more votes than jobs. Industry experts say the United States is long past the days when steel mills, auto plants and machine shops boosted millions of unskilled Americans into the middle class. Economists say the middle class would benefit more from efforts to boost the economy as a whole, rather than a particular sector such as manufacturing. Link 

Essential reading: Romney to explain tax plan, AIG to take tax breaks, rising stakes for Japan’s sales tax, and gas taxes drop

Window shopping in Tokyo's Ginza district REUTERS/Toru Hanai

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

•    Romney narrows the gap on Santorum. Richard McGregor in Washington and Anna Fifield in Mesa, Arizona – Financial Times. Republican presidential hopeful Mitt Romney will outline his tax plans in a speech in Detroit on Friday that has been moved from a ballroom in the city convention center to Ford Field, home of Detroit’s football Lions, to accommodate an expected large crowd. It’s his first detailed outline of the economic and tax plan he would take into the November election and it comes four days before the Michigan and Arizona primaries. Link

•    Giving tax edge to manufacturing carries risks. Kathleen Madigan – The Wall Street Journal. The U.S. tax code is a mess. Favoring one sector over others will only make it messier. U.S. President Barack Obama and GOP candidate Rick Santorum recently released proposals that would give manufacturing enterprises a tax break. Santorum advocates factories pay no federal income tax at all. The goal is to make manufacturing a contributor of economic growth and a provider of middle-class paying jobs. The unintended consequences, however, are likely to be businesses gaming the system for a cheaper tax rate and a government policy that values some jobs over ones that are needed more. While certain employees, companies and regions will benefit, the U.S. economy as a whole is unlikely to be better off from the proposed tax changes. Link

•    AIG profit surges on tax benefit. Erik Holm and Serena Ng – The Wall Street Journal. American International Group Inc. reported profit of $19.8 billion in the fourth quarter, thanks to a large tax benefit the bailed-out insurer booked after predicting it can keep generating profits in coming years. AIG recognized $17.7 billion in tax benefits in the last three months of 2011. AIG’s tax boost came about from the reversal of write-downs it had taken to lower the value of its deferred-tax assets, which are unused tax credits and deductions that can be used to defray future tax bills. The insurer had taken those write-downs starting in 2008, when it suffered huge losses during the financial crisis. What changed, AIG said, is that it expects to report sustainable future profits that will enable it to use its deferred tax assets after all. Link