Tax Break

Essential reading: State, local fiscal burdens drag on economic recovery, and more

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

* State, local fiscal burdens drag on economic recovery. Connor Dougherty – The Wall Street Journal. State and local government tax collections have improved from the recession years, they only recently regained their pre-downturn peak. Meantime, local governments, which unlike states rely on property taxes, continue to suffer from the big drop in real estate prices. Given political pressure to reduce the federal budget deficit, cities and states are likely to get less help from Washington. If that happens they would have to make up the gap with tax hikes of their own or else live more frugally—what they’re doing now. Link

* Public pensions to give ‘clearer picture’ of finances. Lisa Lambert – Reuters. Public retirement systems will have to make major changes in how they disclose their pension assets and liabilities, under new rules that the board in charge of accounting standards for U.S. state and local governments is set to approve on Monday. The Governmental Accounting Standards Board will vote on the changes at an afternoon meeting. The reforms were proposed nearly a year ago to give more detail on how pensions affect governments’ finances. Link

* IRS whistleblower tax take plunges, senator frets. Patrick Temple-West – Reuters. A report from the U.S. Internal Revenue Service’s troubled whistleblower program said tax collections from tipsters fell sharply last year, prompting a U.S. lawmaker on Friday to say he may delay two Treasury Department nominees until the program improves. In fiscal 2011, the IRS collected only $48 million through the program, down from $464 million in fiscal 2010, the agency reported to Congress on June 15. Link

* Germany builds core group for transactions tax. John O’Donnell – Reuters. Germany will work with a core group of European Union countries on introducing a financial transactions tax, its finance minister said on Friday, after efforts to get an agreement among all 27 EU countries fell short. Finance Minister Wolfgang Schaeuble said 10 countries were prepared to use an EU process known as ‘enhanced cooperation’ to push ahead with developing the tax, which Britain and other states, including some in the euro zone, oppose. Link

* MHRC looks to close 2 percent tax loophole. Kiran Stacey – The Financial Times. Tax officials have hinted they could close the six-year-old loophole which may have allowed wealthy people to reduce their tax rate to just 2 per cent by borrowing money from companies of which they were directors. The UK tax-collecting agency HM Revenue & Customs said yesterday its staff were looking into the scheme, which allows people to borrow large sums from their companies, free of tax. Link

Essential reading: New trial ordered in huge New York tax shelter case, and more

The federal courthouse at 500 Pearl Street in New York. REUTERS/Chip East

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

* NY judge orders new trial in huge tax shelter case. Larry Neumeister – The Associated Press. A federal judge on Monday ordered a new trial for three of four people convicted in the largest tax fraud prosecution in U.S. history, saying a “pathological liar” who served as a juror had corrupted the trial. U.S. District Judge William H. Pauley III said the juror had spoiled a three-month trial that included 41 witnesses and 1,300 exhibits. Link

* Senate panel chief to detail tax code vision. Kim Dixon – Reuters. The chairman of the Senate tax-writing committee promised to spell out ideas for revamping the tax code next Monday, providing a glimpse of his plan for major fiscal decisions looming at the end of the year. Senator Max Baucus, the Finance Committee chairman, will deliver “a vision for tax reform” on June 11 at the Bipartisan Policy Center, his office said. Link

* U.S. aims at five EU tax evasion deals this month. Patrick Temple-West – Reuters. The U.S. Treasury Department aims to complete agreements with five EU countries by the end of June to crack down on American tax evasion, and cooperation with more countries should be announced soon, a senior Treasury official said on Monday. The Treasury also hopes by the end of June to complete a second model that will enlist the help of other countries. Link

Essential reading: Boehner sticks to no tax-hike pledge, and more

Speaker of the House John Boehner on Capitol Hill in Washington. REUTERS/Larry Downing

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

* Boehner holds firm on no tax-hike pledge. David Lawder – Reuters. U.S. House of Representatives Speaker John Boehner on Thursday dismissed suggestions that Republicans were warming to raising revenue as part of a plan to cut the deficit, adding that tax hikes on millionaires would cost jobs. The top Republican in Congress blasted a proposal from House Democratic leader Nancy Pelosi to raise taxes only on those earning more than $1 million, saying it would hurt too many small business owners, who hire the most U.S. workers. Link

* US House panel backs medical device tax repeal. Patrick Temple-West – Reuters. A Republican-controlled congressional panel voted on Thursday to repeal a tax on medical devices, a key revenue provision in President Barack Obama’s 2010 healthcare reform law, but the measure was not expected to become law. Approval in the House, which is dominated by Republicans, was viewed as probable, possibly as soon as next week. But the measure faced an uphill climb in the Democrat-controlled Senate, where parallel legislation lacks bipartisan sponsors. Link

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 

Essential reading: Union, liberal coalition pushes Obama tax plan, and more

Union supporters in Las Vegas, September, 2008. REUTERS/David Allio

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

* Union, liberal coalition pushes Obama tax plan. John McKinnon – The Wall Street Journal. A coalition of big unions and left-leaning activist groups has formed to support President Barack Obama’s proposal to raise tax rates on families earning more than $250,000, amid growing signs that Democratic lawmakers want to limit tax increases to people making $1 million or more. Link

* An often procrastinating Congress is raring at the gate on tax cuts. Jennifer Steinhauer – The New York Times. The Bush-era tax cuts, which are set to lapse on Jan 1, have both parties in the House and the Senate eager, perhaps even giddy, to vote for their respective versions of an extension of the cuts this summer, well before the due date. Without any extensions, the expiration would raise taxes next year by $221 billion. Link

* Heard in more states: See you in tax court! Nanette Byrnes – Reuters. Six U.S. states have established or considered establishing independent tax tribunals in the last two years, a trend supported by the business community, but one which also is stirring debate about the need for these new tribunals. Georgia and Illinois approved laws last year to create a tax court. In Alabama, Governor Robert Bentley announced Thursday that he will pocket veto legislation that would create a new state tax tribunal, due to flaws in the bill, but will support its reintroduction in the next legislative session. Link

Essential reading: HP loses Dutch tax shelter case, popular deductions on the block, and more

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

* HP loses $190 million tax case against IRS. Lynnley Browning – Reuters. Hewlett-Packard Co on Monday lost a battle with the U.S. Internal Revenue Service for more than $190 million in tax refunds tied to a Dutch tax shelter designed by the derivatives arm of American International Group. The ruling turns a spotlight on an aggressive tax-cutting strategy created last decade by AIG Financial Products and bankrolled by several European banks. The strategy involved trading derivatives with the aim of generating capital losses and foreign tax credits for large corporations, like HP, which then used them to try to lower their U.S. tax bills. Link

* In Republicans’ push for tax overhaul, popular deductions on the block. Donna Smith – Reuters. Republicans have not touched hundreds of tax breaks in tax laws, fearing that doing so could be called a tax hike. That could be changing. They’re not advertising it, but Republicans in Congress, along with a few Democrats, are exploring the idea of limiting or ending some of Americans’ most sacred tax breaks. They include deductions on contributions to 401(k) retirement accounts and possibly those on home mortgage interest, each of which save millions of Americans thousands of dollars each year. Link

* Brown warns Californians: Taxes or cuts. Jim Carlton – The Wall Street Journal. California Gov. Jerry Brown laid out a revised budget plan that relies on deeper spending cuts and higher taxes to bridge a projected state deficit that has widened to $15.7 billion from $9.2 billion since January. The Democratic governor said Monday he had no choice but to cut even deeper into social services to help close a budget gap that has shot up due to lower-than-expected tax revenue and delays and court-ordered impediments to spending cuts. Brown proposes to nearly double spending cuts to $8.3 billion for fiscal year 2012-13 from a January estimate that $4.2 billion of reductions were needed. 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: 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: 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