Essential reading: Auditors question PwC reform role, and more

August 6, 2012

Dennis M. Nally, chairman of PwC International REUTERS/Arnd Wiegmann

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

* Auditors question PwC reform role. Adam Jones – The Financial Times. The involvement of a PwC expert in the political process of reforming European accounting law has prompted fresh concern about links between the biggest auditors and those who are supposed to regulate them. The Cypriot government borrowed a PwC technical expert to assist it with pushing forward accounting reform during its six-month presidency of the European Union, which began last month. Link

* GOP assails Harry Reid on Romney tax charge. Jeffrey Sparshott – The Wall Street Journal. The argument over Mitt Romney’s personal tax returns heated up Sunday, with Republicans calling Senate Majority Leader Harry Reid a liar for suggesting the GOP presidential candidate hadn’t paid taxes for a decade. Reid revived the debate last week when he said “an extremely credible source” had told him Romney didn’t pay taxes for 10 years. “It’s clear Romney is hiding something,” Reid said. On Sunday, the GOP launched a countercharge. “I am not going to respond to a dirty liar,” Republican National Committee Chairman Reince Preibus said on ABC’s “This Week.” Link

* Romney persona non grata in Italy for Bain’s deal skirting taxes. Jesse Drucker, Elisa Martinuzzi and Lorenzo Totaro – Bloomberg News. Bain Capital funneled profits from a telephone directory company through subsidiaries in Luxembourg, a common corporate strategy for avoiding income taxes in other European countries, according to documents reviewed by Bloomberg News. The buyer, Italy’s biggest telephone company, now has a total market value less than what it paid Bain and other investors for the directory business. In Italy, the deals have spurred at least three books, separate legal and regulatory probes and newspaper columns alleging investors made a fortune at the expense of Italian taxpayers. Link

* In Cayman Islands, planned tax on expats triggers worries that sun is setting on tax haven. Associated Press. The Cayman Islands have lost some of their allure by proposing what amounts to the territory’s first income tax. Government data show 91,712 companies were registered in the Caymans as of March 2011. A total of 235 banks, including most of the world’s top 50 banks, held licenses at the end of June as did 758 insurance companies. The new tax is necessary to meet British government demands that the territory diversify its sources of revenue beyond the fees and duties it now relies on, that have left his administration with a budget deficit. Link

* Retiring soon? You probably paid more in taxes than you will get in Social Security benefits. The Associated Press. People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press. Previous generations got a much better bargain, mainly because payroll taxes were very low when Social Security was enacted in the 1930s and remained so for decades. Link

* The numbers inside a hot-button issue. David Wessel – The Wall Street Journal opinion. The contrasting tax comments from Barack Obama and Mitt Romney underscore their philosophical differences over the roles of the individual and society. But the most tangible disagreement is on taxing the rich. Over the past 30 years, the weight of federal taxes has shifted from the income tax to the payroll tax, which is less progressive. Link

* The Clinton tax challenge for Republicans. Bruce Bartlett – The New York Times opinion. Republicans are adamant that taxes on the ultra-wealthy must not rise to the level they were at during the Clinton administration, as President Obama favors, lest economic devastation result. But they have a problem – the 1990s were the most prosperous era in recent history. This requires Republicans to try to rewrite the economic history of that decade. Link

* Tax plans and tax spin. Jennifer Rubin – The Washington Post opinion. The lower tax rates are “paid” for in Mitt Romney’s tax proposal by eliminating deductions. The progressivity is maintained by taking away more of the deductions and exemptions from the rich than from lower-income taxpayers. This, incidentally, was the same concept at play in the 1986 tax reform bill. So far, other than the Buffett tax gambit and a hike in corporate tax rates, we’ve seen nothing from President Barack Obama that comes close to the level of detail provided by Romney’s team on tax reform. Link

* Stay classy, Harry. The Wall Street Journal editorial. Who is this Deep Throat? Harry Reid won’t say, and it isn’t clear how someone who merely invested with Bain would know anything about Mitt Romney’s personal taxes. But Mr. Reid and his spokesman want everyone to know that he or she or it is an “extremely credible source.” You have to love that “extremely” touch. Link

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