Tax Break

Essential Reading: Deductions Romney would target, Buffett Rule politics, more

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

* Romney specifies deductions he would cut. Sara Murray – The Wall Street Journal. In order to offset the 20 percent income tax cut he has proposed for all taxpayers, Romney would eliminate or limit for high-earners the mortgage interest deduction for second homes, and likely would do the same for the state income tax deduction and state property tax deduction. He also said he would look to the Department of Education and the Department of Housing and Urban Development for budget cuts. Link

* Q+A: The ‘Buffett Rule,’ a minimum tax on the rich. Kim Dixon and Patrick Temple-West – Reuters. President Barack Obama and congressional Democrats are laying a political trap for Republicans to be sprung on Monday when the U. S. Senate is slated to vote on the proposed “Buffett Rule,” which would slap a minimum tax on the highest-income Americans. Link

* For Americans abroad, taxes just got more complicated. David Jolly – The New York Times. Americans overseas face a new form that will add to the hassle of tax time for many and, critics say, set up the unwary for penalties. The new requirement comes courtesy of the Foreign Account Tax Compliance Act, or FATCA, an effort to crack down on offshore tax evasion by U.S. citizens. Link

* New rules will decimate profits. Steve Johnson – The Financial Times. A tightening of the International Accounting Standards Board’s IAS 19 directive from 2013 will stop companies from padding their earnings statements with anticipated pension fund returns that may never materialize and slash hundreds of millions of euros from the profits of many European companies next year. Link

* Barclays’ tax deals face US scrutiny. Megan Murphy – The Financial Times. Barclays’ controversial tax planning business will come under fresh scrutiny in a U.S. Tax Court in New York today in a suit over Bank of New York Mellon’s use of a Barclays structure that cost the U.S. government more than $1bn in lost tax receipts. Link

Tax and accounting calendar

Some important upcoming events in the tax and accounting world:

Monday, April 16 - U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 after March 18, 2010 must report information about those accounts under FACTA using form 8938, or face stiff penalties.

Tuesday, April  17 -

    Tax day in the United States. Individual income tax returns and gift tax returns due. Tax-writing U.S. House of Representatives Committee on Ways and Means will hold a hearing on possible reforms to certain tax-favored retirement savings plans including employer-sponsored defined contribution plans and Individual Retirement Accounts (“IRAs”) that might be considered as part of comprehensive tax reform.  10 am, Room 1100 of the Longworth House Office Building.

Tuesday, April 17 – Friday, April 20 – International Accounting Standards Board meeting in London.

Tuesday, April 17 – Thursday, April 19 – The International Financial Reporting Standards (IFRS) Foundation, the World Bank and OHADA (The Organization for the Harmonization of Corporate Law in Africa) will run a workshop in the West African city of Douala, Cameroon, to support adoption of IFRS.

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: Islamic finance may enter accounting mainstream, tax pitfalls for fund investors, and more

 

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

 * Geithner swings back at critics of tax and regulatory policy. Damian Palleta – The Wall Street Journal. Treasury Secretary Timothy Geithner sharpened his rebuke of his political and private sector critics on Wednesday, saying many “misread the underlying dynamics of the economy today.” Geithner, in remarks at the Economic Club of Chicago, called out “business lobbyists” and others and said “many have claimed that the basic foundations of American business are in crisis, critically undermined by taxes and regulation.” Link 

* Christie leaning on tax subsidies in hunt for jobs. Charles Bagli – The New York Times. Since taking office in 2010, Republican Gov. Chris Christie has approved a record $1.57 billion in state tax breaks for dozens of New Jersey’s largest companies after they pledged to add jobs. Christie has emphasized that these are prudent measures intended to help heal the state’s economy, which lost more than 260,000 jobs in the recession. The companies often received the tax breaks after they threatened to move to New York or elsewhere. Link  

Essential tax and accounting reading: Obama wants Romney tax returns, battling over big oil breaks, Japan’s mega sales tax, and more

U.S. President Barack Obama walks past a pumpjack, New Mexico, March 21, 2012. REUTERS/Jason Reed

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

* Obama campaign seeks Romney tax returns. Mark Maremont – The Wall Street Journal. President Barack Obama’s re-election campaign called on Republican front-runner Mitt Romney to release his tax returns dating back to the 1980s, to see if they contain information about an uncommon investment arrangement at his former private-equity firm that may have helped swell his individual retirement account. The request follows a page-one article in The Wall Street Journal on Thursday that recounted how employees at the firm, Bain Capital, were allowed to invest their retirement money in companies the firm acquired, including investing through a special share class that could skyrocket in value in successful deals. Romney’s IRA was valued at between $20.7 million and $101.6 million as of August, according to his financial disclosures. Link

* GOP blocks Obama’s effort to end tax breaks for big oil. Zachary Goldfarb and Brad Plumer – The Washington Post. President Obama on Thursday called on Congress to end tax breaks for oil companies in a populist speech that sought to turn the blame for gas prices nearing $4 a gallon back onto his Republican critics. In fiery, campaign-style remarks delivered from the Rose Garden, Obama told lawmakers that they can “stand with big oil companies, or they can stand with the American people.” Senate Democrats followed by forcing a vote to end tax cuts for the five largest oil companies, which Republicans resoundingly defeated. 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

Essential tax and accounting reading: Californians support tax hikes, dividend taxes, $1 trillion of tax breaks, inheritance tax, and more

California coast REUTERS/Mike Blake

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

* Strong majority back Jerry Brown’s tax-hike initiative-poll. Anthony York – The Los Angeles Times. California voters strongly support Gov. Jerry Brown’s new proposal to increase the sales tax and raise levies on upper incomes to help raise money for schools and balance the state’s budget, according to a new USC Dornsife/Los Angeles Times poll. Sixty-four percent of those surveyed said they supported the governor’s measure, which he hopes to place on the November ballot. It would hike the state sales tax by a quarter-cent per dollar for the next four years and create a graduated surcharge on incomes of more than $250,000 that would last seven years. Link

* Will a dividend-tax hike spoil the party. Jack Hough – The Wall Street Journal. Apple’s dividend announcement this past week is good news for income investors, but bad news might be lurking around the corner. Unless Congress takes action, the top tax rate for the highest earners on most dividends, currently 15 percent, is set to jump to a whopping 43.4 percent next year. That is a maximum income-tax rate of 39.6 percent —since dividends will once again be taxed as regular income — plus a 3.8 percent tax on investment income as part of the health-care overhaul passed in 2009. Link

* Tax breaks exceed $1 trillion: Report. John McKinnon – The Wall Street Journal. A congressional report detailing the value of major tax breaks shows they amount to more than $1 trillion a year — roughly the size of the annual federal budget deficit — and benefit wide swaths of the population. The new report, by the nonpartisan Congressional Research Service, underscores how far-reaching many of the tax breaks are. They include the exclusion from taxable income for employer-provided health insurance, the biggest break, at $164.2 billion a year in 2014; the exclusion for employer-provided pensions, the second-biggest, at $162.7 billion; and the exclusions for Medicare and Social Security benefits. Link

Essential tax and accounting reading: PCAOB and U.S. Chamber clash on auditor rotation, IRS auditing rich more, Amazon’s taxing times, missing parts of Ryan’s plan, and more

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

* Top watchdog, U.S. Chamber clash on auditor rotation. Dean Aubin – Reuters. At a forum on whether corporations should be required by regulation to switch auditors every few years, Public Company Accounting Oversight Board Chairman James Doty clashed with the U.S. Chamber of Commerce. The chamber had written the PCAOB urging it to withdraw a white paper that it issued asking for public comment on auditor rotation. Doty said that the PCAOB has been looking at other ways of improving audit quality at the two-day forum. He suggested it was important for the PCAOB to look into rotation so it could have input on an issue being considered in other countries. Link

* IRS audit rate jumps for U.S. millionaires. Reuters. U.S. tax officials are looking more closely at the tax filings of multimillionaire earners, with the audit rate for those making more than $10 million a year jumping in 2011, according to newly released documents. The Internal Revenue Service audited about 30 percent of the returns of those with adjusted gross income of $10 million or more in 2011, according to statistics released on Thursday. By contrast, in 2010, the agency audited about 18 percent of that group. Link

* UK’s Osborne takes heat over budget’s ‘Granny Tax.’ Cassell Bryan-Low and Nicholas Winning – The Wall Street Journal. UK Chancellor of the Exchequer George Osborne faced a public backlash on Thursday as his budget — pitched as a determined move to fix the economy through austerity — instead was assailed as pandering to the rich while hitting pensioners with what was quickly dubbed a “granny tax.” The budget spat began Wednesday, when Osborne included a provision dropping the country’s top personal income-tax rate to 45 percent from 50 percent for those who earn more than 150,000 pounds ($198,600) annually. At the same time, the budget included a measure freezing a threshold above which people pay income taxes, which will result in slightly higher payments for some pensioners over time. Link

Essential tax and accounting reading: Another Deloitte China resignation, Volcker backs rotation, Scholastic gets sales tax bill, and more

Former US Federal Reserve Bank Chairman Paul Volker

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

* Deloitte quits second Chinese firm as auditor fears grow. Donny Kwok – Reuters. Deloitte said on Thursday it had quit as auditor for Chinese milk formula products maker Daqing Dairy Holdings Ltd hours after its shares were suspended, the accounting firm’s second resignation from a Hong Kong-listed Chinese company in days. The news has sparked fears this could be the start of a much wider and deep-rooted problem at Chinese companies listed in Hong Kong, after a series of scandals at U.S.-listed mainland companies last year that has unnerved some of the big auditors. The Daqing resignation came a week after Deloitte quit as auditor of Boshiwa International Holdings, which holds the license to make Harry Potter- and Bob the Builder-branded clothes, attracting unwanted attention to one of the Big Four accounting firms. Link

* Volcker backs contentious auditor rotation idea. Dena Aubin and Sarah Lynch – Reuters. Former Federal Reserve Chairman Paul Volcker backed a controversial proposal to impose term-limits for audit firms on Wednesday, saying it would serve as “a powerful incentive to maintain professional discipline.” The proposal would effectively break up business relationships that have existed for years, and it has provoked strong opposition from the accounting industry. Volcker said he understands that the idea of requiring rotation of audit firms every so often makes the firms “uneasy.” But he said his personal experiences, including his deep involvement in probing accounting failures at Arthur Andersen, convince him that this is the right path forward. Link

* Rich would skirt ‘Buffett Rule,’ report shows. John McKinnon – The Wall Street Journal. Millionaires likely would find legal ways to avoid paying higher taxes under President Barack Obama’s proposed “Buffett Rule,” a new congressional estimate finds. Taxpayers’ likely efforts to sidestep the rule’s effects mean it would raise about $47 billion in extra revenue over the next decade, according to a new estimate by the nonpartisan Joint Committee on Taxation. That’s less than some outside experts had expected and a relatively small amount compared with the size of federal budget deficits, which are running at more than $1 trillion a year. Link

Essential tax and accounting reading:GOP tax reform, Apple’s cash moves, Irish increasingly anti-tax, EU financial transaction tax and more

Apple CEO Tim Cook REUTERS/Robert Galbraith

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

*  Republican budget plan seeks to play up tax reform. David Lawder, Donna Smith and Richard Cowan – Reuters. A much-anticipated budget plan due on Tuesday from Republicans in the House of Representatives includes sweeping tax reforms that cut rates and pare down individual income tax brackets from six to two – 10 percent and 25 percent. The plan, which aims to deflect potential fallout from controversial Medicare reforms ahead of November elections, also would nearly eliminate taxes on overseas profits and reduce the domestic corporate tax rate to 25 percent. Even though the plan has almost no chance of becoming law, Republican lawmakers believe that focusing on tax reform will draw a stark contrast with Democratic President Barack Obama’s budget plan and be popular with voters. Link

 

* Amazon growth under threat from sales tax. Barney Jopson – The Financial Times. Amazon faces a growing threat to its sales according to a survey in which 50 percent of shoppers said they would be likely to buy less from the retailer if it were to collect sales tax. In a Citigroup survey, 52 percent of Amazon shoppers who do not currently pay sales tax on the site said having to do so would slightly, moderately or greatly decrease the likelihood of their buying a product from the retailer. Amazon does not collect sales tax in most U.S. states where it does not have a physical presence – but several initiatives are under way to make it start to do so amid criticism by bricks-and-mortar retailers that it exploits a loophole. Link