Tax Break

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

* The rich get even richer. Steven Rattner – The New York Times opinion. New statistics show an ever-more-startling divergence between the fortunes of the wealthy and everybody else — and the desperate need to address this wrenching problem. Even in a country that sometimes seems inured to income inequality, these takeaways are truly stunning. In 2010, as the nation continued to recover from the recession, a dizzying 93 percent of the additional income created in the country that year, compared to 2009 — $288 billion — went to the top 1 percent of taxpayers, those with at least $352,000 in income. That delivered an average single-year pay increase of 11.6 percent to each of these households. Link

* Death tax defying – The Wall Street Journal editorial. While Washington continues to debate what to do with the federal death tax — the top rate is now 35 percent and is scheduled to rise to 55 percent  next year — states are starting to recognize that their high estate taxes are a good way to chase away wealth producers. Last year Ohio abolished its estate tax, joining the 28 other states that do not impose such a tax at death. The left has long been flummoxed by polls showing that roughly two of three Americans want this tax abolished. Americans instinctively understand that the tax is unfair. It punishes a lifetime of thrift and investment solely due to the accident of death. And it does so in a way that imposes another tax on income that in most cases has already been taxed once, or sometimes twice. 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 budget detailed, EU transfer tax fading, Australia taxes mining, UK and Switzerland settle, and more

A stack reclaimer with a pile of iron ore at the Rio Tinto Parker Point ship loading terminal in western Australia

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

* Republican budget draws election contrast with Obama. David Lawder – Reuters. Paul Ryan’s proposed budget plan would shrink deficits to $3.13 trillion over 10 years – less than half the size of the deficit projected under President Barack Obama’s plan. It would dismantle Obama’s 2010 healthcare reform law and make deep cuts to federal employee pensions and to social programs such as food stamps and the Medicaid healthcare program for the poor. The Ryan plan proposes to grind down public debt as a share of economic output to 63.5 percent by 2021, compared with 76.3 percent under Obama’s plan. It was 67.7 percent at the end of 2011. Link

* UK budget to juggle politics of austerity. Matt Falloon – Reuters. British finance minister George Osborne looks set to divert attention from the country’s limp economy with politically driven tax measures in Wednesday’s budget, aiming to appease both parties in the ruling coalition and keep financial markets onside. He may remove a 50 percent income tax band for the highest earners. The Conservatives say that high a levy is a barrier to aspiration, while the Labour opposition say it is a fair way to spread the pain. To please the Liberal Democrats, the junior coalition partner, Osborne is expected to raise the income tax threshold by more than previously announced to 9,000 pounds ($14,300), which may please some low and middle earners. Link

The IRS as border guard

Paying taxes is about as stressful as the airport body scanner. Now the Senate wants to combine the two.

"The $50,000 check to the IRS in a separate bin, please" (Reuters)

The Senate last week passed a $109 billion highway trust fund reauthorization bill. To help pay for roads and bridges, the Senate is hoping to ferret out big tax dodgers with the threat of nabbing your passport for tax liabilities.

The Senate bill would revoke or deny a passport to anyone who owes $50,000 or more in federal taxes. The government could revoke a passport upon reentry into the United States for such people.

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  

Essential reading: Diamond Foods accounting, Swiss turmoil, GOP budget, uncertainty on Indian taxes, UK bonuses, and more

Representative Paul Ryan (R-WI) will submit a GOP budget proposal Tuesday. REUTERS/Joshua Roberts

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

* Seeds of trouble sown at Diamond Foods years ago. Nanette Byrnes, PJ Huffstutter and Mihir Dalal – Reuters. The accounting scandal at snack maker Diamond Foods in recent months may have shocked shareholders and some California walnut farmers. But a number of accounting and industry experts spotted red flags some time before. A close examination of business practices at Diamond Foods points up a number of warning signs, including unusual timing of payments to growers, a leap in profit margins, and volatile inventories and cash flows. The picture that emerges is of a company that for years seemed to push hard on every lever to meet increasingly ambitious earning targets and allowed top executives to pull in big bonuses, according to interviews with former Diamond employees and board members, rivals, suppliers and consultants, in addition to reviews of public and non-public Diamond records. Link

* Baer chairman steps aside, to deal with U.S. probe. Martin de Sa’Pinto and Emma Thomasson – Reuters. The chairman of Swiss private bank Julius Baer will head a special committee dealing with a U.S. tax probe after leaving his current role, underlining the pressure Swiss banks are feeling from claims they helped wealthy Americans dodge taxes. Raymond Baer, a 52-year-old member of the bank’s founding family who has been at the group almost 25 years and served as chairman for nine, will become honorary chairman of the bank as of its next shareholder meeting in April. As part of that new role, he has been elected to chair a special committee overseeing cooperation with U.S. authorities, the bank said on Monday. Link

“Tax” is key issue in Obama healthcare Supreme Court case

U.S. Supreme Court building in Washington, D.C. REUTERS/Molly Riley

To be or not to be a tax?

That is the question, wrote Donna Smith of Reuters, in a March 14 piece on the upcoming U.S. Supreme Court case that will test the validity of President Barack Obama’s controversial healthcare system overhaul.

The central issue in the arguments is the money that Americans will have to pay starting in 2014 to the Internal Revenue Service if they fail to obtain medical insurance.

Though the money is going to the IRS, the Obama administration has gone to great lengths to term it a penalty, not a tax.

Do you support a “Buffett tax” on the wealthy?

Warren Buffett (C), chairman and CEO of Berkshire Hathaway, sells jewelry at Borsheims jewelry store in Omaha, Nebraska, May 1, 2011 as part of his annual shareholders' meeting. Buffett supports higher taxes on the wealthy. REUTERS/Nati Harnik/Pool

Nearly two-thirds of Americans support imposing a minimum tax rate of 30 percent on those who earn $1 million or more a year, according to Reuters/Ipsos poll results released on Tuesday.

The poll showed that 64 percent of those surveyed favored a “Buffett tax” as proposed by the Obama administration and named for multibillionaire investor Warren Buffett, who backs it.

Essential tax and accounting reading: UK tax probe of eBay sellers, Swiss advisers, public transit subsidy, and more

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

* Senate backs return of higher transit subsidy. Eric Yoder – The Washington Post. The maximum tax-free subsidy that employers can pay for their workers to use public transit in their commuting would nearly double to $240 a month under a provision in the transportation bill the Senate passed Wednesday. The maximum had been $230 a month in 2009-2011 under a series of temporary laws, but when a further extension wasn’t passed by the end of last year, the amount reverted to its previous level of $125 a month. Meanwhile, a subsidy for parking at commuter lots to take public transportation rose from $230 to $240 a month due to an inflation adjustment. Link

* Two Swiss financial advisers accused of helping U.S. taxpayers hide money. Lynnley Browning – Reuters. Prosecutors in New York on Wednesday indicted two Swiss financial advisers, one a former private banker at financial giant UBS AG, on charges of conspiring to help wealthy Americans hide $267 million in secret bank accounts. In separate indictments, one of them alleging that a child was used to carry cash to a client, charges were brought against Hans Thomann, 61, and Josef Beck, 46. Both live in Switzerland, but they worked separately from each other. Link  

* Tax probe on eBay sellers comes under fire. Vanessa Houlder – The Financial Times. The UK revenue agency’s approach to tackling evasion risks “missing the bigger picture,” advisers said on Wednesday after it launched a targeted campaign aimed at eBay traders. Gary Ashford of the Chartered Institute of Taxation, a professional body, said launching campaigns aimed at specific groups every few weeks was confusing and risked diluting the anti-evasion message. The institute called on Inland Revenue to focus its efforts on a one-off national campaign open to all taxpayers whose affairs were not up to date. Link