Tax Break

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

* China minister calls for tax changes to boost spending. Liyan Qi – The Wall Street Journal. China needs to improve its tax system to stimulate spending, Finance Minister Xie Xuren said Thursday. The central government will study measures to expand a value-added tax trial, and improve China’s consumption tax to “guide reasonable consumption” more effectively, Mr. Xie said in a statement on the ministry’s website. Link

* Obama stands firm against extending tax cuts for rich. Caren Bohan and Thomas Ferraro – Reuters. President Barack Obama’s Democrats traded shots with Republicans on Wednesday about how best to avoid a year-end “fiscal cliff,” as the administration insisted on the need to let tax cuts for wealthier Americans expire as scheduled on January 1. The prospect of higher taxes and automatic spending cuts that kick in next year have spurred calls for Obama to temporarily extend all of the Bush-era tax breaks to coax Republicans into a sweeping debt deal, but the White House stood firm. Link

* Bill Clinton becomes Romney’s favorite surrogate for Obama. Sam Youngman – Reuters. In the space of five days, Bill Clinton went off message on two important issues – tax cuts and Romney’s time as a private equity executive – raising questions about the former president’s motives. This week, Clinton said he favored a temporary extension of George W. Bush-era tax cuts for all Americans, not just the middle class, as Obama prefers. Link

* Scottish Power tests US tax breaks on interest. Kim Dixon – Reuters. The U.S. Tax Court is expected to issue shortly its first major decision in years on the tax deductibility of interest in certain corporate debt transactions in a case that pits the UK’s Scottish Power against the Internal Revenue Service. The IRS is challenging $932 million in interest deductions taken by the power utility on $4 billion in intercompany notes issued between company units. The tax collector argues that the transactions should be treated as equity, which would nullify the deductions taken by the Spanish-owned company. Link

* Tweaking tax code could spur green energy: senator. Roberta Rampton – Reuters. A freshman Democratic senator thinks he may have found a way to encourage investment in wind, solar and biofuel projects without sapping too many taxpayer dollars or injecting new venom into a bitter partisan battle over energy incentives. Chris Coons will introduce legislation on Thursday that would allow a broad range of renewable power generation and transmission projects to qualify for a tax structure used widely by pipeline and other energy-related companies. Link

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

* As governor, Romney picked winners and losers of his own. Andy Sullivan – Reuters. Massachusetts Gov. Mitt Romney’s June 2006 announcement that drugmaker Bristol-Myers Squibb was moving into his state served as a signature accomplishment. The new facility came with a price tag: Romney and other state officials agreed to $67 million in tax breaks and other inducements to ensure the New York-based company picked Massachusetts over rival states like North Carolina. Romney backed tax breaks for film makers and biotech and medical-device manufacturers. His administration promoted venture capital-style funds that extended loans to start-up companies, some of which subsequently went out of business. Link

* Christine Lagarde, scourge of tax evaders, pays no tax. Kim Willsher – The Guardian. Christine Lagarde, the IMF boss who caused international outrage after she suggested in an interview with the Guardian on Friday that beleaguered Greeks might do well to pay their taxes, pays no taxes, it has emerged. As she is an official of an international institution, her salary of $467,940 (£298,675) a year plus $83,760 additional allowance a year is not subject to any taxes. Link

* Anti-tax crusader assails report on Republican shift. Patrick Temple-West – Reuters. Anti-tax crusader Grover Norquist, scourge of any and all tax increases, said on Tuesday that a news report questioning the vitality of his “no new taxes” pledge – a vow taken by many Republican politicians – is overblown. Republicans who have not signed the pledge may be in congressional races they are unlikely to win anyway, while other candidates have rules against signing pledges, he said. Link 

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

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

* How Apple sidesteps billions in taxes. Charles Duhigg and David Kocieniewski – The New York Times. As it stands, Apple Inc paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies. Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year. Link  

* KPMG faces inquiry over rescue of HBOS. Helia Ebrahimi – The Sunday Telegraph. Accountancy giant KPMG could face a formal investigation by the UK’s accountancy watchdog for its conduct leading up to the rescue of HBOS by Lloyds TSB. HBOS whistleblower and former head of risk, Paul Moore, has referred KPMG to the regulator in a formal complaint. Moore also has written to Treasury select committee chairman Andrew Tyrie, seeking his support. Moore’s complaint comes a week after it emerged that the former head of HBOS’s corporate bank, Peter Cummings, is to fight a seven-figure fine handed out by the Financial Services Authority for his part in the collapse of the bank. Link  

* Amazon seals sales tax deal with Texas. Barney Jopson – The Financial Times. Amazon has struck an unexpected deal with Texas to start collecting sales tax from consumers at the start of July, in a further sign of its readiness to accept a levy that it had long opposed at state level. Under the deal Amazon will invest at least $200 million to build distribution centers in Texas and create at least 2,500 jobs over the next four years while beginning to collect sales tax on July 1. Link  

A tea vendor holds an umbrella at a roadside in Mumbai. REUTERS/Sima Dubey

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

* In presidential race’s give-and-take, hope for a fiscal compromise. John Harwood – The New York Times. Some elected officials and policy experts see improving odds for 2012 to end up yielding much more, including progress toward a deal on tax and budget issues that have confounded Washington’s divided government. Some say the campaign dialogue could even bring a deal closer. Senator Charles Grassley of Iowa, a member of the Finance Committee, recently urged fellow Republicans to accept Democrats’ demand for some tax increases, as long as Democrats accepted the longstanding argument by conservatives that revenue calculations account for at least some positive effect on economic growth from changes in the tax code. Link 

* Macquarie hedge fund exits short bets in India on tax fears. Nishant Kumar – Reuters. Macquarie’s Asia hedge fund has exited its short positions in Indian single stock futures in response to a controversial set of proposed tax rules that could lower investment returns. Foreign investors have raised concerns on two recent Indian provisions to tax indirect investments and combat tax evasion. Link

* Filmmaker wins case against IRS. Michael Cieply – The New York Times. Documentary filmmakers can breathe a sigh of relief, knowing that the producer and director Lee Storey won her case last week against the commissioner of Internal Revenue in United States Tax Court. The IRS tried to disallow Storey’s deduction of expenses incurred while making and marketing the film “Smile ’Til It Hurts: The Up With People Story.” Link 

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

* Tax evaders face higher penalty. Vanessa Houlder – The Financial Times. British tax evaders with secret accounts in Switzerland will pay more than originally planned to legitimize their holdings under a revised deal signed on Wednesday. Revenue & Customs demanded that Switzerland increase the maximum one-off penalty to cover former unpaid tax from 34 per cent to 41 per cent, after a similar revision to the Swiss-German tax deal earlier this month. The program is expected to bring in billions of pounds. Link

* US pressure over India tax law. James Politi and James Crabtree – The Financial Times. US business groups are putting pressure on Tim Geithner, the treasury secretary, to intervene to try to stop India from enacting a contentious retroactive taxation law that they argue would have “severe consequences” for American investors in the country. They have asked him to “raise concerns” about the tax bill in talks with Indian officials during the spring meetings of the World Bank and International Monetary Fund this week. Link

* What Hong Kong knows about China. Joseph Sternberg – The Wall Street Journal. In a bit of virtuous contagion, a coughing fit of accounting honesty concerning Chinese companies appears to be spreading from the U.S. to Hong Kong. The earnings season just concluded has seen a mini-spate of delayed accounts. Trading in 13 companies’ shares is currently suspended pending incomplete audits. Link

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

Feeling cranky about your taxes, ahead of the April 17 deadline?

The Obama campaign wants to remind you of your tax rate, and how it compares with that of millionaire Mitt Romney, in a jab at one of the wealthiest men ever to run for president.

The campaign rolled out an online calculator letting individuals compare their tax rates to Romney’s, the presumed Republican nominee to face President Barack Obama in the Nov. 6 election.

Put $30,000 into the calculator as your annual income income and a box pops up showing such a households pays about 18.6 percent of their income in taxes. That’s followed by a box showing Romney’s 2010 tax rate of 13.9 percent.

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

* 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