Tax Break

Essential Reading: Capitol Hill, Liechtenstein, Mark Zuckerberg and Mitt Romney

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

* US payroll tax talk mired in election-year politics. Richard Cowan and Donna Smith – Reuters.

Republican and Democratic leaders accused each other of bad faith negotiations on Tuesday as both parties played hardball in talks to extend a tax cut for 160 million U.S. workers. Both sides agree the payroll tax cut should be renewed for a full year before it expires on Feb. 29, and its extension has been seen as a foregone conclusion. But the parties are far apart over how to pay for it and the rancor of election-year politics complicates lawmakers’ work. They argued over whether to continue a pay freeze on federal workers for another year, saving around $26 billion, and whether to squeeze $31 billion out of the Medicare healthcare program for the elderly. Link.

* Romney’s returns revive scrutiny of lawful offshore tax shelters. Jonathan Weisman – The New York Times.

Mitt Romney’s tax returns suggest the Republican presidential candidate’s personal finances could remain an issue in the presidential campaign. And it highlights how, under the tax code, legality and fairness are not necessarily the same thing. By going offshore, pension funds, universities, foundations and even large individual retirement accounts can structure those investments to avoid that heavy a tax. The issue revolves around “blocker corporations,” set up in tax havens like the Caymans to help nonprofit giants avoid the unrelated business income tax, which was created to prevent nonprofits from straying into profit-making ventures that compete with taxpaying companies. Although not illegal, so-called UBIT blockers cost the U.S. Treasury nearly $1 billion a decade, according to Congress’s bipartisan Joint Committee on Taxation. Link.

* Senate highway bill would tap into individual’s retirement money. John McKinnon – The Wall Street Journal.

Levin and Conrad try to close $155 billion in tax “loopholes”

There’s been a lot of talk about tax loopholes in recent months. Now there’s a bill to go with it.

On Tuesday, two Democratic U.S. senators — Carl Levin and Kent Conrad — piled a laundry list of long-standing proposals into their “Cut Unjustified Tax Loopholes Act.”

The bill would add $155 billion to the country’s coffers over the next 10 years, according to estimates put together by the Joint Committee on Taxation and the Office of Management & Budget on earlier versions of these proposals. That’s more than enough to pay for a whole year of a payroll tax break.

Essential reading: payroll tax talks, state income tax cuts and a Swiss bank fine

Swiss bank Julius Baer, Bahnhofstrasse, Zurich. REUTERS/Arnd Wiegmann Welcome to the top tax and accounting headlines from Reuters and other sources.  

* Payroll tax negotiations heat up again. Rosalind Helderman – The Washington Post.

U.S. House and Senate negotiators appointed to reach a compromise over how to pay for extending the expiring payroll tax cut hold a key meeting early on Tuesday. Ongoing discussions between the 20-member conference committee, as well as House and Senate leaders, will make clear whether Democrats and Republicans will reach a quick deal by Feb. 17 to extend the tax cut for the remainder of the year. Democrats and Republicans remain split on how to pay to extend the tax cut. Link.  

Essential reading: Chinese airlines, Swiss banks and more

 

Air China planes on the tarmac of the Beijing Capital International Airport. REUTERS/David Gray

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

* China bars airlines from EU tax plan. Simon Rabinovitch – The Financial Times. The Chinese government has barred the country’s airlines from complying with a European Union charge on carbon emissions, escalating a dispute that officials have warned could turn into a trade war. Chinese airlines had previously said they would not pay the EU carbon tax, but the formal prohibition by the State Council, or cabinet, puts Beijing in direct opposition to Brussels. China has notified all Chinese airlines that, without government approval, they cannot join the EU emissions trading scheme or charge customers extra because of it, state-agency Xinhua said. The impact on Chinese airlines with routes to Europe was unclear. Although the EU’s carbon scheme went into effect for airlines on January 1, Brussels has not started charging them yet. Link to The Financial Times.

Tax clips from the Web: Oklahoma mulls cutting income tax, how to spend your refund and more

Miss Oklahoma, Betty Thompson (R), first runner up in the Miss America contest

Oklahoma wants to abolish its state income tax. The plan, according to Governor Mary Fallin, is to achieve one of the lowest income tax rates in the country by eliminating some tax credits and closing loopholes in the tax code. Other taxes would not be increased, according to The Oklahoman.

“Our goal is to transform Oklahoma into the best place to do business, the best place to live, find a quality job, raise a family and retire in all of the United States. Not just better than average, but the very best,” state Representative Leslie Osborn said. (Cue Rodgers and Hammerstein music)

Across the United States, the average state sales tax rate has dropped, according to William Barrett at Forbes.

Treasury aims to make FATCA more user-friendly

Proposed regulations to implement a new law to fight offshore tax evasion may not be as burdensome as many have feared.

That’s the word from a U.S. Treasury Department official on soon-to-be released regulations affecting thousands of banks and brokers worldwide subject to the Foreign Account Tax Compliance Act (FATCA), signed into law in 2010.

FATCA has drawn sharp complaints from foreign banks because of its reach and costs of compliance. The Treasury Department is now “keenly aware” of the challenges of compliance, and the proposed regulations will answer many concerns, said Emily McMahon, acting assistant secretary for tax policy.