Tax Break

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

* India May Change Tax Anti-Avoidance Rule. Khushita Vasant – the Wall Street Journal. India Thursday made an attempt to clear the air on a new rule for going after companies set up for the sole purpose of avoiding taxes, saying it is considering putting the onus on the authorities to prove any wrongdoing. Foreign investors have been concerned about the proposed anti-avoidance rule as it could override India’s tax treaty with Mauritius which exempts capital gains from being doubly taxed. Most foreign funds invest in Indian stocks and bonds through Mauritius. Link

* Noda says Japan running out of time to hike taxes, restart reactors. Chico Harlan – The Washington Post. Japanese Prime Minister Yoshihiko Noda said Thursday that he faces policymaking challenges “weightier” than those of his predecessors, adding that the country can no longer afford to delay decisions about its most divisive issues, including a tax hike and the restarting of its nuclear reactors. Link

Sales tax rates stay high for many, revenue vital for cities, states

A shopper stands outside Saks’ famed flagship store in New York City where sales tax is 8.875 percent REUTERS/Mike Segar

When it comes to sales tax three things matter: location, location, location. 

Depending on where you live you may be paying 10 percent sales tax on your purchases, or zero. The tax could be marginal to your community’s fiscal health, or absolutely vital.

States rely on taxes rung up at the register for about one-third of their revenue on average, but as Cate Long pointed out in a recent MuniLand post, that rate varies widely depending on where you are.

State tax revenues up in 2011, but not booming

Tax collections rose in all 50 states last year, according to the U.S. Census bureau, as our colleague Lisa Lambert reported Thursday.

“The nationwide increases in state government tax revenue are an indication of the stabilization of revenues for state governments,” Lisa Blumerman, chief of the Governments Division at the Census, was quoted as saying.

Stable but not booming, according to a Rockefeller Institute analysis of that data, which finds overall tax revenue is still down significantly from pre-recession levels in 2008.
Source: Rockefeller Institute analysis of Census Bureau data.

Essential reading: Obamas and Bidens release tax returns, challenge Romney, and more

U.S. President Barack Obama and Vice President Joe Biden in Washington February 21, 2012. REUTERS/Jason Reed

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

* Obamas and Bidens to release tax returns. Mark Landler and Jim Rutenberg – The New York Times. President Barack Obama and Vice President Joseph Biden plan to release their own income tax returns on Friday, along with a statement calling on Republican presidential contender Mitt Romney to do the same, according to an Obama campaign official. Link

* Swiss can’t offer more to Germany, US in tax row-fin min. Catherine Bosley – Reuters. Switzerland cannot make further concessions to Germany and the United States in a dispute over untaxed funds in secret bank accounts, Swiss Finance Minister Eveline Widmer-Schlumpf was quoted as saying in a newspaper interview on Friday. Widmer-Schlumpf also said France and Italy were likely to be watching these developments before themselves seeking agreements to claw back taxes. Link

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

Your tax dollars at work

If you are writing a check to your state department of revenue or the IRS over the next few weeks, or are simply reminded by tax time just how much you send along to the government each year, you may well wonder where all that money is going.

The Center on Budget and Policy Priorities put together two graphics which capture the highlights.

First the states:

Like the states, the federal government spends big on healthcare.

Education drops off, however, replaced by spending on Social Security and national defense:

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

Essential tax and accounting reading: taxing the rich, MF Global accounting under review, Simpson-Bowles cuts get a vote, tax hike helps New York budget, and more

Fiscal Commission co-chairs Alan Simpson (L) and Erskine Bowles April 14, 2011. REUTERS/Kevin Lamarque

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

* The case for raising top tax rates. Eduardo Porter – The New York Times. The wealthy are feeling defensive about their taxes. Most Americans may think the rich pay too little but, not surprisingly, only 30 percent of the rich agree. More than two-thirds of families earning a quarter of a million dollars a year or more tell Gallup’s pollsters that their taxes are too high. It is true that high-income Americans carry the biggest tax burden. While fewer than 1 in 20 families make more than $200,000, they pay almost half of all federal taxes. However they feel about the tax man, there is a case to be made that they can pay much more. The reason has nothing to do with fairness, justice or ideology. It is about economics and math. Link

* US FASB weighs reform to accounting used by MF Global. Sarah Lynch – Reuters. The U.S. accounting standard-setting board could this year revamp the accounting treatment that MF Global used to mask risky European sovereign debt exposure, an official at the board will tell lawmakers on Wednesday. “Moving forward with this project will involve a series of public education and decision-making meetings and the exposure of a proposed standard for public comment,” said Financial Accounting Standards Board Technical Director Susan Cosper in prepared testimony. Cosper noted that while historically most repo-to-maturity transactions have involved U.S. Treasury securities, the range of instruments involved has broadened over the years to include other debt instruments such as those seen in the MF Global case. Link

Tax clips from the Web: Kanye’s charity blunders, D.C. lobbyists and identity fraud

A Federal Trade Commission report listed identity theft as the top complaint from consumers in 2011 – for the 12th year in a row. Of those 280,000 complaints, about 24% were tax or wage-related. This is something of a stark wake-up call to the perils of our electronic lives, which can be hacked without our knowledge, right up until we hit the send buttons on our electronic tax returns, says Jonnelle Marte for Smart Money’s tax blog: “For some victims, the fraud isn’t discovered until they hit the send button on their electronic tax returns — and get a rejection note from the IRS. Other times it takes a little longer to know something is wrong, such as not receiving a refund check.”

If you have been unlucky enough to be hacked, correcting the error could take the IRS from 6-12 months, according to Marte.

Home on the range

Here is a quote from the author of the Tax Foundation’s annual rating of the states with the best tax climates -“The lesson is simple,” wrote study author Mark Robyn, “A state that raises sufficient revenue without one of the major taxes, all things being equal, has an advantage over those states that levy every tax in the state tax collector’s arsenal.”