Tax Break

Essential reading: IRS under strain, Clinton’s tax proposal, and more

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

* Overseer: IRS could face ‘serious problems.’ Siobhan Hughes – The Wall Street Journal. The Internal Revenue Service is under strain as it faces a flood of new demands at a time of budget cutbacks, its government overseer said in a report on Tuesday, posing a risk that the tax collector will experience “serious problems in the future.” Link

* Bill Clinton: Extend all Bush-era tax cuts for a year. Reuters. Former President Bill Clinton on Tuesday jumped into the debate over how to handle the looming expiration of historically low tax rates, putting him somewhat at odds with fellow Democrat President Barack Obama. Clinton, on cable television’s CNBC, said Congress may have to temporarily extend all the low tax rates that expire at year-end to give lawmakers more time to come up with a plan to cut deficits. Link

* Unchanged tax, health policies to explode U.S. debt-CBO. David Lawder – Reuters. U.S. public debt would balloon to twice the size of the nation’s economy in 25 years if current tax and spending policies are extended, Congress’ budget referee said on Tuesday, delivering fresh fodder for a year-end budget brawl. The Congressional Budget Office said in a report that if tax cuts enacted under George W. Bush are allowed to expire as scheduled on Dec. 31, along with some other tax and spending policies, U.S. public debt would shrink significantly, falling to 53 percent of gross domestic product by 2037 from 73 percent this year. Link

* Greece warns of going broke as tax proceeds dry up. Liz Alderman – The New York Times. As European leaders grapple with how to preserve their monetary union, Greece is rapidly running out of money. Greek leaders said that despite their latest bailout of 130 billion euros, or $161.7 billion, they face a shortfall of 1.7 billion euros because tax revenue and other sources of potential income are drying up. Link

* Tribunal faces rise in number of tax disputes. Vanessa Houlder – The Financial Times. More than 20,000 tax disputes are queuing to be heard by the recently established tribunal system as the government struggles to crack down on avoidance. The backlog of unheard cases rose by a third over a year to stand at 22,100 in the fourth quarter of 2011, according to the UK Ministry of Justice figures. The number actually heard by the tribunal also rose sharply, from 9,100 in 2010 to 11,000 in 2011. 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: 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: Renouncing U.S. citizenship to save on taxes, and more

Americans for Tax Reform President Grover Norquist. REUTERS/Jonathan Ernst

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

 

* No comment necessary: Grover Norquist plays the Nazi card. Andrew Rosenthal – The New York Times opinion. Senators Chuck Schumer and Bob Casey introduced legislation last week that would penalize Americans who renounce their citizenship to evade taxes. Grover Norquist, the president of Americans for Tax Reform, had this to say: “I think Schumer can probably find the legislation to do this. It existed in Germany in the 1930s and Rhodesia in the ’70s and in South Africa as well. He probably just plagiarized it and translated it from the original German.” Link

* Ireland-bound Eaton is latest to end U.S. corporate citizenship. Nanette Byrnes – Reuters.
Eaton Corp’s purchase of electrical equipment maker Cooper Industries means another U.S. company will soon leave the United States in favor of relocating its headquarters to a foreign country with sharply lower taxes. In the case of diversified industrial manufacturer Eaton, a complicated corporate structure will allow it to become part of an Irish corporation and enjoy that country’s low 12.5 percent corporate tax rate. Link

* Yahoo to sell Alibaba stake, take hit on taxes. Maxwell Murphy – The Wall Street Journal. Yahoo tried for years to find a tax-efficient way to unlock the value in its partial Alibaba ownership, but ultimately decided to eat the full 38 percent in federal, state and local taxes in order to finalize a deal, CFO Tim Morse said on Monday. Though a tax-free deal eluded Yahoo and Alibaba, the taxable alternative is nonetheless complex, and is designed to incentivize Alibaba’s initial public offering. Link

* Brazil makes new tax cuts to revive economy. Luciana Otoni and Tiago Pariz – Reuters.
Brazil’s government on Monday unveiled a new round of temporary tax cuts worth about $1 billion to boost the struggling automotive sector and other industries in its latest attempt to restore a lost economic boom. Investor jitters about the economy at home and abroad helped send Brazil’s currency to its weakest closing level in three years on Monday. But Finance Minister Guido Mantega said the measures should help revive an economy that has been stagnant since mid-2011, while also providing protection from the debt crisis in the euro zone. Link

* Japan tax hikes can’t wait; BOJ stimulus still needed-OECD. Reuters. Japan should stick to its plan of raising the consumption tax from 2014 or even earlier to demonstrate budget prudence and avert a run-up in borrowing costs, the OECD said, adding that a credible fiscal consolidation plan must be top priority. The Organization for Economic Co-operation and Development also urged the central bank to maintain the zero rate policy and quantitative easing mainly via asset purchases until inflation returns and reaches the Bank of Japan’s target of 1 percent. Link

* IRS widens debt forgiveness program. Patrick Temple-West – Reuters.
More middle-class Americans will be able to work out their debts to the U.S. Internal Revenue Service because of changes in a tax payment forgiveness program, the agency announced on Monday. The “Offer in Compromise” program lets taxpayers negotiate agreements with the IRS to pay less than the full tax owed. The announced changes make the program more flexible for taxpayers, with some people able to pay off their debts faster, according to the IRS. Link

* Would Romney be another Bill Clinton or another George W. Bush? Bruce Bartlett – The New York Times opinion.
The Bill Clinton and George Bush 43 administrations are almost perfect tests of starve-the-beast, tax and spending theory; Clinton raised taxes in 1993, while Bush signed into law seven different major tax cuts, according to a Treasury Department study. If there were any truth whatsoever to starving the beast, we should have seen a rise in spending during the Clinton years and a fall in spending during the Bush years. In fact, we had exactly the opposite results. Link

David Cay Johnston debates Grover Norquist

Reuter’s tax columnist David Cay Johnston appeared on the most recent episode of Real Time with Bill Maher, on the same panel with anti-tax activist Grover Norquist.

To see the whole show, you have to be a subscriber to HBO or HBO go, but here’s a clip from the “overtime” section of episode 248 including tax commentary, a discussion of J.P. Morgan’s loses, and much more politics both old and new.

Ep. 248: May 11, 2012 – Overtime

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: Offshore tax havens’ links to crime, budget choices, and more

Tourists walk on Seven Mile Beach at sunset in George Town, Cayman Islands REUTERS/Gary Hershorn

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

* These islands aren’t just a shelter from taxes. Robert Morgenthau – The New York Times opinion. The British Virgin Islands, the Cayman Islands, Gibraltar, Bermuda and the Bahamas – these offshore jurisdictions allow some individuals and corporations to engage in outright tax fraud, costing America at least $40 billion each year. The secrecy laws in these tax havens are at the root of serious crimes: fraud, money laundering and international terrorism. Follow the trail of nearly any major financial scandal and you will enter one or more of these notorious jurisdictions. Link

* House Republicans target social cuts to shield military. David Lawder – Reuters. Republicans in the House of Representatives on Monday will fire their first shots of the next deficit-reduction battle, advancing legislation to cut nearly $380 billion largely from social programs while protecting defense spending. President Barack Obama is likely to consider signing a replacement measure that offers “balance,” meaning spending cuts combined with new revenues such as those proposed in Obama’s February budget plan. But the tax increases for the wealthy proposed by Obama, along with some spending increases, make that budget a non-starter for House Republicans. Link

Essential reading: Ernst & Young no longer lobbying for companies it had audited, and more

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

* Ernst, audit clients cut lobbying ties-records. David Ingram and Dena Aubin – Reuters. Ernst & Young’s lobbying unit is no longer listed as a lobbyist for three major U.S. companies, all of whom were 2011 audit clients of the accounting giant. The deregistration follows questions raised by two U.S. senators in March about whether the dual relationships crossed auditor independence boundaries. Documents filed last month with Congress showed that Washington Council Ernst & Young, the E&Y unit, was no longer registered as doing lobbying work for Amgen Inc, CVS Caremark Corp and Verizon Communications Inc. Link

* House Democrats plan to pounce again on GOP budget. Ed O’Keefe – The Washington Post. House Democrats plan to attack the spending plan next week as the GOP-controlled House votes on a budget reconciliation package that includes cuts to replace automatic, across-the-board reductions set to begin in January as part of the Budget Control Act. The BCA raised the debt ceiling, cut $1 trillion in federal spending and authorized another $1.2 trillion in cuts over the next decade, with roughly half of the money coming from defense spending. Link

That’s not fair! may push U.S. tax revamp

It may seem too simple to be true, but the urge among humans for basic fairness may be among the biggest drivers for a revamp of the U.S. tax code, at least competing with the influence of lobbyists, general greed and politics.

That was one message of tax war veterans gathering at the Urban Institute in Washington on Tuesday where Nietzsche, Marx and other philosophers were mulled along with the hard-nosed lessons of the last revamp in 1986 under Republican President Ronald Reagan.

“Fairness is still the queen of principles that brings us back,” to trying to fix the tax code, said Eugene Steuerle, who was a key economic aide in Reagan’s Treasury Department under that historic overhaul.
Democrats and Republicans say they want a rewrite of the code and cite the mind-numbing complexity combined with the unfairness of breaks favoring select groups. The issue could gain steam after the Nov. 6 elections.