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Country Rankings - United States

  • Jul 20, 2018   United States: yang

    Smaller, electronic tax forms seems to be the way the world is going. Last week, I praised the US Internal Revenue Service for releasing a substantially truncated version of the main personal federal income tax form, which should hopefully make tax time a slightly less harrowing experience for many. Yet, this week, I might well have to whip that encomium away from the US after the American Institute of Certified Public Accountants urged the IRS to rethink the contents of the new version of Form W-4. The original purpose of this form was to provide employers with basic information to enable an employee's taxes to be withheld appropriately. But, according to the AICPA, form W-4has grown into something of a monster, in placing too much of a burden on employees and compelling the disclosure of potentially sensitive data, it says. Maybe the moral here is that we'll always experience a certain tension between simplification and complication in taxation. As tax authorities seek more and more information about us in order to enforce laws passed by their political masters, the same political masters are passing tax reforms instructing authorities to make life easier for taxpayers. It's kind of a yin and yang thing, or like surfing the line between order and chaos. And unfortunately taxpayers continue to experience tax wipe-outs.
    Source: https://www.tax-news.com/news/US_Urged_To_Trim_Tax_Form_W4____86867.html

  • Jul 11, 2018   United States: slimline

    On the subject of dreams, sometimes they do come true. Like in the United States, where the personal income tax return is being shrunk down to the size of a postcard. Except it's not. Not quite anyway. You could probably count on one hand the number of presidential candidates down the years who haven't promised to shrink Form 1040 to postcard proportions. Indeed, there's probably at least one who pledged to reduce it to the size of a postage stamp, providing just enough room, I imagine, to scribble the letters I O and U. You won't have nearly enough fingers or toes to count the number who have failed to deliver the postcard, though. Maybe they kept forgetting about the stamp. And anyway, they probably would have been voted out of office by the time the postcard arrived. So, while President Trump can't quite claim to be the exception to the rule, taxpayers will nevertheless soon be filing a 1040 lite, instead of the full-fat, high-carb, calorific version they have become accustomed to. In dimension, it's not quite a postcard, more a boring letter home. But it's progress, I suppose. The question is, though, can the diet be persevered with? We all know Congress has an overwhelming urge at times to feed taxpayers an unhealthy diet of fattening credits and sugary deductions. Here, the key word is "moderation."
    Source: https://www.tax-news.com/news/IRS_Announces_Plans_To_Simplify_Personal_Income_Tax_Return____86864.html

  • Jun 28, 2018   United States: jolt

    For better or worse, BEPS has permeated deep into the fabric of the world's tax regimes. You can tell this by the sheer volume of tax developments that are related to, directly or indirectly, the issues discussed in the OECD's BEPS report each week. And the remainder of those tax developments that aren't exclusively about BEPS likely still reference them in one way or another. From Liechtenstein to Luxembourg, from Andorra to Anguilla, the list of jurisdictions now incorporating new international standards on tax avoidance and tax transparency tells you all you need to know about how far the BEPS project's tentacles have spread into the tiniest jurisdictional nooks and crannies. Combined with tax reform in the United States and elsewhere, for tax commentators, this is boom time – a fiscal Klondike Gold Rush, if you like, with a rich, golden seam of events to get your teeth into every day. It's a far cry from old, pre-BEPS/congressional deadlock days, when tax developments tended to ebb and flow. Now they just flow, thanks to the Paul Ryans, the Pierre Moscovicis, and the Pascal Saint-Amanses of this world, among many others. If only they'd tell a few jokes now and again. Because the downside is that the densely technical nature of many of these changes does make things challenging from the point of view of injecting a bit of humor into proceedings. The courts are also playing their part too, as we saw in the US last week, with a potentially game-changing decision by the US Supreme Court. Nobody ever seems to mention it, but there's something very appropriate about the name of the Supreme Court precedent, which had set the rules of the sales tax game in the United States. That is, until last week. It's called Quill, as in those ink pens made from a feather that they used back in ye olden days. And for all the use it's been recently, Quill may as well have been decided in 1792 rather than in 1992. It was hoped that the Supreme Court's new decision in the Wayfair v South Dakota case, decided last week, would bring some much-needed clarity to the sales tax landscape in the US, following several years of confusion over the ability of states to tax the rapidly rising number of purchases made by consumers from remote out-of-state retailers via the internet. And while it may take some more time for the latest ruling to be fully digested by state authorities, businesses, tax advisers, and taxpayers, many will welcome the fact that the highest court in the land has at last taken account the vastly different, digitalized retail landscape that would have been unrecognizable to most back in the early '90s. However, this might not be the end of the story. While the ruling suggests that state governments now have carte blanche to devise laws along similar lines to the one contested in South Dakota, I suspect that not everyone concerned is going to take that prospect lying down, least of all the remote retail sector. But more important perhaps, is how this ruling is received in Washington. The Supreme Court has long held the view that it is for Congress to ultimately decide this issue with federal legislation, but lawmakers have been sharply divided on the matter – even within party ranks – between those pressing for a level sales tax playing field and those arguing that e-commerce growth should not be impeded with what amounts to new taxation. Judging by recent comments by President Trump, he probably falls into the former category. But there are plenty of Republicans who belong to the latter camp. Maybe the new decision will provide Congress with the jolt it needs to act and close this matter. Either way, while the Supreme Court's review was welcome, perhaps we haven't seen the last chapter of this saga yet. That the Supreme Court itself was divided – in a 5-4 decision – suggests that we haven't heard the last of this issue yet. The Supreme Court's decision wasn't the only new take on an old idea last week.
    Source: https://www.tax-news.com/news/US_Supreme_Court_Permits_States_To_Tax_Remote_Sales____86847.html

  • Jun 13, 2018   United States: gilti

    Well, it's been another mixed week for US tax reform. First, the good news. Last week, the Internal Revenue Service announced that, in certain circumstances, relief from tax penalties will be offered to those struggling to come to terms with the new transition tax. This demonstrates that Treasury and the IRS have at least been listening to the concerns of tax practitioners and other tax campaigners that a law primarily aimed at large corporations could swamp smaller taxpayers with new reporting and administrative requirements. Now the bad: we saw more suggestions last week that the TCJA, or certain aspects of it, have not only muddied the tax-planning waters when the intent was to make them clearer, but has also become a law of unintended consequences. Indeed, that the IRS felt compelled to provide transition tax penalty relief in the first place shouldn't really be a cause for celebration. Not only this, it's difficult to deny that it is also becoming a law of unintended consequences. A key aim of the reform was to reverse a situation whereby companies were perceived to be rewarded for investing and holding profits overseas and effectively punished for investing profits in the US. However, as a recently published critique of the TCJA's international tax provisions by the Institute on Taxation and Economic Policy (ITEP) concluded, the drafters of the legislation may have merely exacerbated this problem (unwittingly, it is assumed) with the new Global Intangible Low Tax Income (GILTI) regime and the foreign-derived income attributable to intangibles (FDII) deduction. To cut a long story short, GILTI is an anti-profit shifting measure designed to discourage US corporations from shifting highly mobile income from intellectual property rights to low-tax jurisdictions. But, according to ITEP, in so doing, the GILTI rules have actually created an incentive for US corporations to send their tangible assets abroad. Likewise, the FDII deduction, which is supposed to be a carrot for American companies holding their IP portfolios in the US, might achieve a similar result, says ITEP. Whether this turns out to be the case or not remains to be seen. It is certainly too early to tell how the TCJA, with its hundreds of changes to the tax code, will affect corporate decision-making in the long-term. So perhaps we should reserve judgment for now. Innocent until proven GILTI, as they say.
    Source: https://www.tax-news.com/news/TCJA_Encourages_Firms_To_Shift_Profits_Offshore_Says_ITEP____76828.html

  • Jun 11, 2018   United States: (unintended) opportunities

    According to US Senator Orrin Hatch (R-UT), who is Chair of the US Senate Finance Committee, the tax reform is overwhelmingly popular with US taxpayers across the board, from small and large businesses to employees. Well, he would say that, wouldn't he? After all, as chairman of a panel with jurisdiction over tax legislation, Hatch is as responsible as anyone for the contents of the tax reform bill, the Tax Cuts and Jobs Act (TCJA). In Hatch's defense, most business surveys show that the corporate tax reform measures are having a positive impact on business operations. The economic boost that Republicans were hoping for when they pushed the legislation through Congress in the dying days of 2017 has materialized, they say. But we all know that the TCJA is far from perfect. For starters, it's 1,000 pages long. Like the complete works of Shakespeare, there's a lot of room for interpretation. And this perhaps can be considered the law's greatest flaw. The conclusions of a survey by BDO in the US, published in April, highlighted that the law provides many opportunities for businesses to reduce tax. According to BDO, "just as there are thousands of pages in the new tax law, there are thousands of possibilities when it comes to planning." Or, as David Kamin, Professor of Law at the New York University School of Law, put it at a Senate hearing on tax reform in April, the law has turned out to be a "bonanza for tax planning." Correct me if I'm wrong but I thought tax reform was supposed to put an end to the zillions of dollars spent on tax planning and compliance and the gazillions of hours expended doing so. Perhaps I'm being naive. 
    Source: https://www.tax-news.com/news/Surveys_Suggest_Taxpayers_Satisfied_With_TCJA_Says_Hatch____76826.html

  • Mar 13, 2018   United States: choices, choices...

    It is often said that if confidentiality is your thing, then you need look no further than a Delaware or Nevada corporation, and not necessarily to a BVI, Bermuda, or Cayman Islands company. But it is usually to the latter group and their peers that most fingers point when an international tax scandal breaks. But maybe that's a little unfair. Most leading IOFCs now have systems in place to systematically collect and store company ownership information – unlike the majority of OECD and G20 countries. In fact, in 2017, Jersey received an international award from a professional association for its work to enhance the island's central register of information on company beneficial ownership and control. Offshore jurisdictions have resisted calls to make such data available to the public, pointing out that to do so would make the global transparency playing field decidedly uneven while the rest of the world caught up with their efforts, much to their detriment. Such calls are growing louder though, especially in the European Union, and this could well form the next battleground in the war for greater levels of tax and corporate transparency. Still, policy makers might be ignoring a crucial question here – will registries of beneficial ownership actually reduce levels of tax avoidance, evasion, and financial crime? The evidence so far is quite inconclusive. Last week, the Isle of Man announced that two-thirds of those who were supposed to provide information under the Beneficial Ownership Act have done so. A remarkably similar proportion of companies made declarations under Jersey's highly-rated beneficial ownership information collection system last year, with 35 percent of expected information returns due by the deadline not filed. Now, I'm not suggesting that the one-third of company owners that failed to comply with beneficial ownership rules in these jurisdictions have anything to hide. But is it not the case that "clean" companies will have fewer reservations about these rules than dirty ones? After all, what self-respecting criminal is going to enter his details into a government register, to be viewed by the police any time they like, and potentially by the public too? Not to mention the fact that some unsavory types might welcome the chance to use publicly available company ownership data for nefarious purposes? So I think it's fair to conclude that this is by no means a perfect solution. Remaining on the issue of company formation, and it must be decision time for many business owners in the United States following the introduction of the Tax Cuts and Jobs Act: S Corporation, or C Corporation? The TCJA was supposed to make tax so much easier for people, for companies, and for people who own companies. But for pass-through entities (S corps) – where business income passes through a company to be taxed at the level of the individual owners or members – things must feel like they have got more uncertain.
    Source: https://www.tax-news.com/news/IRS_Urged_To_Extend_This_Years_S_Corp_Election_Deadline____76508.html

  • Feb 15, 2018   United States: nudge

    In the bizarre and esoteric world of taxation, something good – say a 14 percent corporate tax cut – can also be something bad. Just ask the string of companies which have reported multi-billion-dollar hits to their fourth-quarter and full-year 2017 results because of the accounting effects of the United States Tax Cuts and Jobs Act. AIG and GM, for example, reported one-off accounting charges totaling approximately USD14bn last week, taking both companies into the red. Indeed, in this topsy-turvy world, something you'd think under normal circumstances would be undesirable, like a financial loss, actually becomes an asset. In this case, the ability to use past losses to offset future income, thus enabling the taxpayer to pay less tax. And, as if to underline the point that there's rarely anything straightforward where taxation is concerned, the value of these deferred tax assets (DTAs) is in direct correlation with the rate of income tax. In other words, the higher the tax rate, the more they are worth. So there you have it. In an almost gravity-defying way, tax cuts can sometimes cost taxpayers, as well as benefit them. The pain of devalued DTAs is, however, expected to be experienced only in the short-term. Unsurprisingly, companies expect to benefit from a substantially lower rate of corporate tax over the long-term. But not overwhelmingly so. There's plenty of devil in the detail of the TCJA. Many companies expect the benefits of the reduced corporate tax rate to be a least partially offset by an acronym soup of anti-avoidance provisions, particularly BEAT (Base Erosion Anti-Abuse Tax) and the tax on GILTI (Global Intangible Low Tax Income). Indeed, I often wonder whether there's a staffer in Congress whose sole job it is to come up with particularly fitting legislative acronyms. For if taxpayers aren't careful, they could indeed get beaten by BEAT, and made to feel guilty about their GILTI.
    Source: https://www.tax-news.com/news/More_US_Firms_Announce_Investments_After_Tax_Cuts____76325.html

  • Jan 31, 2018   United States: growth

    Well, I tried my hardest last week not to mention certain subjects. But for a tax pundit like me, US tax reform and Brexit are the gifts that keep on giving. In the United States, tax reform continues to be as divisive politically after the fact as it was during the legislative progress. Indeed, a recent survey by the Pew Research Center suggests that those whose political sympathies lay closer to the Democrats than the Republicans still oppose the changes, even though a great many of them stand to benefit. Complain as they might that the TCJA was skewed towards corporations and fiscally irresponsible, there's very little that the Democrats can do at the moment to reverse things. Perhaps this year's mid-term congressional elections may give them more influence over legislation and policy. But, would they really want to start picking off the bits of the TCJA they don't like? Given that the tax cuts are encouraging some of America's largest firms to relocate operations domestically, and that the IMF tacitly endorsed the tax reforms by predicting they would help boost global growth, that could be a very dangerous from an electoral point of view. The US tax cuts aren't having an impact only domestically; they have reverberated worldwide, with many authorities embarking now on soul-searching on tax policy, knowing that if they put a foot wrong there are some very attractive tax options on offer to investors in the United States.
    Source: https://www.tax-news.com/news/US_Tax_Reforms_To_Boost_Global_Growth____76291.html

  • Jan 16, 2018   United States: feel-good factor

    By contrast, across the Atlantic, it seems the good times are about to roll for taxpayers after the enactment of the Tax Cuts and Jobs Act. And not only has the tax reform feel-good factor driven US stocks to their highest values, companies have announced pay rises and other tax perks for employees as a result, such as with the recent announcement from Walmart. But even here, some companies are seeing short-term fallout. As a result of the cut to the corporate income tax rate to 21 percent, many large multinationals have adjusted the value of their deferred tax assets, resulting in a write down in their profits, typically by billions of dollars. And elements of the TCJA could also provide particularly problematic for banks, many of which have expressed concern about the "BEAT" interest deduction limitation provisions. What's more, while taxes might be getting lower for many individuals and businesses, they don't seem to be getting much easier, despite earlier promises that taxpayers will be able to file on a postcard. Indeed, as the National Taxpayer Advocate, Nina E Olson, pointed out last week in presenting her latest annual report to Congress, taxpayers are going to need all the help they can get in the coming weeks and months as they adjust to these major changes. Even the 2008 Economic Stimulus Payment – a relatively minor undertaking compared with changes being brought about by the TCJA – resulted in a 125 percent increase in calls to the Internal Revenue Service's jammed phones lines between 2007 and 2008, according to Olsen. So heaven help you if you expect to seek advice from an IRS agent any time in the next year or two. Tax reform was supposed to reduce the need for taxpayers to hire help from tax professionals to get their tax returns right. But judging by Olsen's findings, and given that US taxpayers already spend about 8 billion hours a year complying with their taxes, that need has probably never been greater!
    Source: https://www.tax-news.com/news/Walmart_Joins_The_Ranks_Of_US_Firms_Sharing_US_Tax_Reform_Benefits____76205.html

  • Dec 27, 2017   United States: reformed

    2017 saved the best until last.The end of the year saw a series of breakthroughs, with the EU-UK Brexit negotiations moving forward, and the approval in the US of a law to comprehensively reform the US tax code, having ping-ponged back and forth between House and Senate. And so,the United States has managed its first major tax code shake-up since the 1980s, and one of the largest tax cuts in its history, givingTrump the best Christmas present he could have hoped for, after a year of legislative frustrations – a gift that will keep on giving you might say, especially if it results in the economic growth that Republicans are expecting and the boost in tax revenues. While much commentary on the subject has focused on the domestic impact of the plan, US tax reform has triggered a wave of soul-searching by government ministers and by national trade associations and chambers of commerce worldwide, suggesting that they too consider that the corporate tax cut and switch to a territorial corporate tax basis will have an impact on global investment patterns and potentially divert foreign investment away from their borders. For example, earlier this month, the German Association of Chambers of Commerce and Industry (DIHK) warned that a corporate tax cut in the US will put Germany under further competitive pressure and would lead to growing calls for the Government, after the next coalition is finalized, to reduce taxes. "The next federal government will have to respond," declared Eric Schweitzer, DIHK President. But it might not be all one-way traffic. According to the Centre for European Economic Research (ZEW) in Mannheim (Germany seems to be especially worried by US tax reform), the corporate and international tax measures will indeed make the US a much more attractive investment location, including for European companies. But, it points out, since, in theory, US investors will no longer face double taxation on foreign earnings, foreign jurisdictions with low corporate taxes, like Ireland, will continue to be attractive for them. On the other hand, jurisdictions like Germany, with much higher corporate tax rates, willlose out, according to Professor Christoph Spengel, who studied the matter. Certainly, members of the Australian Government are worried about the implications of a leaner and meaner US tax code, with Finance Minister Scott Morrison saying recently that the development makes the case for an Australian corporate tax cut even more urgent. So, despite warnings of a race to the bottom on corporate tax, will US tax reform trigger a new wave of corporate tax cuts around the world? That will be the main question for 2018.
    Source: https://www.tax-news.com/news/US_Congress_Approves_Tax_Reform_Bill____76060.html

  • Dec 12, 2017   United States: home straight

    On either side of the Atlantic, taxpayers have waited a long time for political breakthroughs. Then two came along in the space of a week. In the United States, it began to feel as if Congress and the Administration were destined to always talk about tax reform but never deliver it, especially when Republicans and the administration of President Trump failed to deliver on their most basic pledge, that of expunging Obamacare. However, spool the tape forward a few months (I'm from an analogue era), and now that the Senate has passed its version of the Tax Cuts and Jobs Act, we are possibly within a few days of witnessing one of the most sweeping changes to the US tax code, certainly this side of the Reagan tax reform of the mid-1980s, and possibly decades before that. But let's not count our chickens just yet. If the House of Representatives intends to merge its bill with the Senate's, there could be some more hard yards ahead, for some of the differences between the two sets of proposals are quite stark, notably around the taxation of pass-through business income. And it's undeniable that, whatever one's politics, this bill is fairly divisive. The Democrats will likely try every trick in the legislative book to stop the TCJA in its tracks, and continued doubts about the cost of the tax reform could be the weak point in the Republican lines that they'll attack. What's more, the Republican Party in Congress is far from unified around these reforms. So the next few days and weeks could be the most crucial. On the other side of the pond, the end of last week also saw a long-awaited breakthrough in the Brexit negotiations after months of stalemate, notably with regards to EU citizens' rights, the Irish border question, the divorce bill, and, importantly from a tax law point of view, the jurisdiction of the European courts. But, again, I feel duty-bound to sound a note of caution here. That it's taken since March 2017 to get this far in the talks does not bode so well for the trade negotiations, which are expected to be much more vexed. And given the EU's insistence that they won't start until next February, leaving only about one year for the talks to conclude, this marathon will have to be run at sprint pace.
    Source: https://www.tax-news.com/news/US_Senate_Tax_Bill_Best_For_Americas_Top_Earners____75914.html

  • Nov 21, 2017   United States: comprehensive

    Supporters of tax reform legislation currently making their way through the United States Congress would have us believe that their tax reform proposals (plural, because there's still two of them) are all about simplification. There's a lean and mean new corporate tax, and when tax reform is all signed and sealed, Form 1040 will be the size of a postcard. That may be the case, but let's not kid ourselves. These tax reform bills are complex. And if you look beyond the headline measures, you'd probably be inclined to agree. For example, if you're brave enough to browse through the scores of amendments made to the Senate Finance Committee Chairman's mark prior to committee approval, you'll find such essential measures as those related to services performed by certain individuals in the Sinai Peninsula, the replanting of citrus plants, and the craft brewing trade – the latter being a major theme in the package of amendments. I can't help but connect the dots – is there a US citizen making a tangy beverage in the deserts of Egypt? So much for ending the practice of pandering to special interests! In one way, this is indicative of just how far the tax code's tentacles have spread over the past 30 years, to the point where virtually no form of economic activity is left untouched. But perhaps it also tells us that simplification can only go so far. Modern economies are complex. Life is complex. So tax, I'm afraid to say, will be complex too. Not that we shouldn't guard against unnecessary complexity. Indeed, something is clearly wrong when it can take hundreds of hours for a business or individual with complex financial affairs to discharge their tax obligations – and even then inadvertently arrive at the wrong amount.
    Source: https://www.tax-news.com/news/US_Tax_Reform_Bills_Advanced_By_Senate_Committee_House____75792.html

  • Nov 13, 2017   United States: exciting

    The tax reform legislation making its way through the United States Congress is amazing. It truly is. Because, like the universe, it seems to be filled with infinite possibilities. Depending on what you read, it both slashes taxes for the middle class and raises them at the same time. It will be both deficit neutral yet be massively fiscally irresponsible. It will force the wealthy to pay more tax while effecting a massive giveaway to the rich. It will create millions of jobs and kickstart a golden age for the US economy, while simultaneously having no effect on the economy and investment. It will ensure multinationals pay their fair share of tax at the same time as massively letting them off the hook. It's a simple, yet complex law, which will make life both easier and harder for everyone and no-one, to be enacted before Christmas or not at all. If, as some physicists surmise, there are an infinite number of universes, the tax reform bill has probably achieved an infinite number of outcomes already. But, coming back to the real world, we can only concentrate on the reform bill in front of us in the one universe that we know about. And as the above suggests, its outcomes, both economically and legislatively, remain uncertain. Indeed, this is a delicate stage of proceedings for taxpayers. In recent years congressional gridlock ensured reform remained in stasis, and it's a lot easier to plan on the basis of nothing happening than lots of major changes at once. Now the stakes are raised. There's a huge amount of detail for taxpayers to absorb, but just about any of it could change between now and final approval. Yes, these are exciting times for taxation in the US. But, equally, they are a bit scary for those with complex affairs trying to plan effectively.
    Source: https://www.tax-news.com/news/US_House_Ways_And_Means_Adopts_Tax_Reform_Law____75730.html

  • Nov 07, 2017   United States: one small step...

    The long-awaited unveiling of the Republicans' tax reform bill in the United States is the obvious place to start this week. And the odds against an historic overhaul to the US tax code appear to have shortened considerably recently. But let's be clear, this is likely to be a marathon, not a sprint. And an obstacle-strewn one at that – a kind of 26-mile steeplechase. In which case, there's plenty of opportunities for the tax reform bill to trip, stumble, bog down, and ultimately run out of legs. Not that I'm trying to deliberately talk down the GOP's tax reform efforts. If we ignore the politics of the proposals for now – as difficult as that may be – it is clear that the kinds of changes that tax reform will bring are long overdue: tax code simplification; lower rates, especially on corporate income; and a wider tax base. There's no escaping the fact that there are some politically contentious provisions in the bill – perhaps unsurprisingly, given its comprehensive scope. As such, it seems improbable that it will sail through Congress mostly unaltered. Indeed, some commentators say that differences arising between House and Senate, and within the Republican ranks in Congress, could take weeks to iron out. Others say the process could take months. Let's not forget that repealing Obamacare looked like it would be a cakewalk for the Republicans when President Trump arrived in the White House. But that effort was subject to a number of false starts, before limping from the track. Taxpayers hoping to benefit from tax reform shouldn't get their hopes up too soon, that's all I'm saying!
    Source: https://www.tax-news.com/news/Republicans_Reveal_US_Tax_Reform_Law____75658.html

  • Oct 10, 2017   United States: deregulates

    The United States might also want to bear this lesson in mind as it begins to contemplate seriously the prospect of comprehensive tax reform. For the country has recent experience of watching the forest of tax legislation, regulations, rules, and guidance regrow with alarming speed since the last major tax reform took place in the mid-1980s, fueled in large part by the fertile process whereby Congress caters to special interests. Perhaps, in a similar vein to President Trump's "one in two out" rule on regulation, there should be something like a "one in one out" rule written into the forthcoming tax reform bill, to prevent the forest growing once again to the point where the wood can't be seen for the trees within 20 or 30 years, or even less. That's assuming there will be a tax reform bill; the lack of progress made towards repealing and replacing Obamacare – the Republicans' number one priority – does not augur well. However, at least the Trump administration appears to be delivering on its promise of regulatory reform (which shouldn't, ordinarily, require the consent of Congress, and is therefore much easier). The latest report on potentially burdensome regulations that are lined up for the chop is likely to have been welcomed by many businesses, especially those expected to be adversely affected by the previous administration's anti-inversion regulations, notably concerning Section 385 of the tax code, which were criticized as onerous and heavy-handed. As for tax reform though, President Trump and the Republican leadership in Congress might be in need of lumberjacks as much as legislators.
    Source: https://www.tax-news.com/news/US_Treasury_Concludes_Review_Into_Burdensome_Tax_Regulations____75426.html

  • Oct 03, 2017   United States: crystalizing

    Across the pond now and many US taxpayers would sympathize with the plight of their German counterparts, having been promised tax reform for what feels like 30 years, which just so happens to be the last time meaningful changes were made to the US tax code. And given that America's predominately two-party system can't get things done in the area of taxation either, German taxpayers should definitely avoid getting their hopes up with three diverse voices around the table. Nevertheless, slowly but surely, a tax reform plan is crystalizing in the US. Back in July, Senior Republican leaders from the House, Senate, and the White House put their name to a statement agreeing a number of broad tax reform principles. Then, last week, the Republican Party rallied around a new tax reform blueprint which put considerably more flesh on the bones. Given the lack of action on tax reform so far, this represents some progress. But we shouldn't get ahead of ourselves. Comprehensive tax reform will mean a comprehensive amount of detail – and plenty of opportunities for lawmakers to disagree. So far, there's been little detail to squabble over. The Republicans are likely to need to get at least some Democrats on board in order to get a tax reform bill through Congress. And this is where the outlook suddenly begins to look depressingly bleak once again. Can the Democrats really be relied upon to help through a huge corporate tax cut, the elimination of the estate tax, and a reduction in the top rate of income tax, among other red lines they would have to cross? You've a better chance of seeing the sun rise in the west, I suggest. Still, I suppose much greater feats have been achieved in the history of humankind, accomplishments that most thought impossible before they were attempted. So, hope springs eternal.
    Source: https://www.tax-news.com/news/US_Republican_Party_Agrees_New_Tax_Reform_Blueprint____75365.html

  • Aug 22, 2017   United States: weighty

    Yes, this judgment does come across as rather harsh and cynical, especially when so much effort is expended by politicians and legislators these days on attempting to simplify tax codes (albeit with little meaningful progress made towards this goal in many jurisdictions). But it can't be an entire coincidence that as the US tax code gets more complicated by the day, more and more taxpayers are paying the price for filing incorrect tax returns, and I dare say that a substantial proportion of the errors are entirely unintentional. According to Senate Finance Committee Chairman Orrin Hatch, in 1913 the 1040 Income Tax Form consisted of three pages, with one page of instructions. In 2016, that same form consisted of two pages with 106 pages of basic instruction and, depending on taxpayer circumstances, 13 separate schedules with more than 70,000 pages of instructions. War And Peace is often used as a benchmark to measure the length of the US tax code, and according to Senator Hatch, the code is now seven times the length of Tolstoy's epic tome. And, I would add, infinitely less interesting.
    Source: https://www.tax-news.com/news/IRS_Penalties_For_Tax_Mistakes_Rise_By_33pc____75025.html

  • Aug 15, 2017   United States: rolling

    In an ideal world, we would tear up the tax codes and start again from a blank sheet of paper. Although I suspect it wouldn't be too long before a single page grew to hundreds, even thousands of pages. In the United States, for example, it probably took no more than 20 years for the intent of last major tax reform, enacted under President Ronald Reagan in 1986, to be undone. True, the Reagan tax reform was hardly started from a blank sheet, but human beings are complex things, as are the economies they create, so I suppose complex taxation is unavoidable to a degree. Still, this doesn't mean complexity shouldn't be attacked whenever it rears its ugly head. On the issue of complexity, the wheels appear to be turning in the United States towards the introduction of a tax reform bill in Congress, likely some time after the summer recess. And one of the main objectives of the Trump administration and Republicans in this regard is simplification of the tax code. This shouldn't too difficult to agree on, should it? I mean, after all, I've never met anybody who said that the tax code wasn't complex enough! Although most agree that simplification is desirable, if not essential, it turns out that simplifying taxation is not going to be simple. Especially any switch from a worldwide to a territorial basis of taxation. This was the conclusion of an analysis of territorial tax systems by the Tax Foundation, at least, warning tax reformers that there will be many detailed issues to consider. For instance, will the new US corporate tax regime feature "participation exemptions," which exclude foreign subsidiaries from domestic tax, or controlled foreign corporation rules, which bring certain foreign companies' profits within domestic tax? In simpler terms, tradeoffs protecting the domestic tax base and creating simple rules are going to be unavoidable, and therefore it is probably going to be impossible to eradicate complexity altogether. Still, that the tax reform ball appears to be rolling is a welcome development. But it sure isn't going to be a piece of cake. Hard work is for the virtuous. Cake is for sinners.
    Source: https://www.tax-news.com/news/Creating_US_Territorial_Tax_System_Complex_Tax_Foundation_Says____74904.html

  • Aug 09, 2017   United States: relieves

    The controversy continues this week as I switch to the vexed issue of corporate inversions. Remember those? They used to be all the rage, but now they seem so 2016. At least, they appear to have gone out of vogue. I had to search pretty hard for evidence of any recent corporate inversions. But perhaps it is the case that final regulations issued by the US Treasury Department last year under the Obama administration have finally made inversions uneconomic. However, in so doing, they might have made being in business generally almost uneconomic. As the American Institute of CPAs wrote in a letter to the IRS last week: "The main purpose of the regulations is to decrease the incidence of corporate inversions. However, the regulations are highly complex, and impose significant documentation and analysis requirements on US corporations for routine and ordinary intercompany transactions." It seems to be the case that companies are not only investing a lot of time in complying with these regulations, but also spending money to reconfigure internal processes and systems. And the worst of it is that companies are being hit irrespective of whether they have inverted or are planning to invert. Which is an awful lot of companies when you think about it – corporate inversions averaged about five per year from 2004 to 2014, according to the Congressional Budget Office. So, there are probably thousands of companies throughout America which breathed a collective sigh of relief on hearing that the offending documentation requirements have been put on hold for another year. But tax reform surely can't come soon enough, as it would end the need for regulatory measures, which have a propensity to produce unintended outcomes. With regards to taxation, it is widely acknowledged that the United States is increasingly out of step with much of the world now, with a combined federal/state corporate tax of around 40 percent in many cases, and its systems of worldwide taxation for companies, and taxation by citizenship for individuals. Indeed, there seem to be few countries that cast their tax net so wide.
    Source: http://www.tax-news.com/news/US_Delays_AntiInversion_Regulations____74850.html

  • May 02, 2017   United States: none the wiser

    Meanwhile, across the Atlantic, President Trump attempted to alleviate growing uncertainty over the US tax code by publishing his much-anticipated tax reform plan. Unfortunately, it probably had the opposite effect. The plan itself merely parroted the proposals he issued in the latter stages of the presidential election campaign last year and offered little insight into how they would be reconciled with the tax reform framework favored by Republicans in the House of Representatives. Importantly, we are still none the wiser about the approach that will be taken to implement some form of border taxation, and the President himself appears unsure what to think about House Speaker Paul Ryan's border adjustment tax idea. All of which is hardly ideal for multinational businesses with long and complex international supply chains, who were doubtless hoping that the White House would put some more meat on the tax reform bones. Instead, they will have to wait for Congress and the Administration to chew some more fat on the issue of corporate taxation and health care reforms.
    Source: http://www.tax-news.com/news/US_Tax_Reform_Proposals_Announced____74096.html

  • Apr 27, 2017   United States: matter of FATCA

    Another group of people who are getting used to fretting are American expats, which, mounting evidence suggests, are becoming financial pariahs, denied access to even basic financial services in their country of residence due to the increasing reluctance of foreign financial institutions to deal with anybody with a US passport. Why? In a word (or, more accurately, in an acronym): FATCA. Attention was drawn to this issue again last week, when the Indian Finance Ministry warned account holders that where Foreign Account Tax Compliance Act-related self-certification and due diligence in relation to financial accounts have not taken place by April 30, 2017, affected accounts may be frozen until such time as these checks have taken place. But are FATCA's days numbered? President Donald Trump has been strangely silent on the matter of FATCA, not only during the campaign phase, but also as President-elect, and as President. So too has the Republican leadership in the House of Representatives, from where the tax reform process, if it ever gets started, will begin. But if FATCA is ever going to be repealed, surely now is the time, while there is a pro-business, anti-regulation President in the White House, and a Republican Congress in place to support him. The pre-election 2016 Republican Platform called for FATCA's repeal, calling it a "warrantless seizure of personal financial information without reasonable suspicion or probable cause" and a threat to the "ability of overseas Americans to lead normal lives.” So the injustices of FATCA are close to the heart of the GOP rank and file, it would seem. Furthermore, it could be argued that FATCA may be superfluous once the OECD's global version, the Common Reporting Standard, comes on stream over the next 18 months. Clearly, President Trump has other items at the top of his agenda on the domestic front, principally the repeal of Obamacare. But tax reform is expected to come next, and we'll have to wait until then to see if the President maintains his silence on FATCA.
    Source: http://www.tax-news.com/news/Indian_Banks_To_Soon_Freeze_Accounts_For_FATCA_NonCompliance____74041.html

  • Mar 30, 2017   United States: expeditious

    It is an unfortunate fact of modern life that small businesses suffer most from such adversarial tax systems, because most can't afford to employ armies of tax attorneys to fight their corner, or expend the time necessary to defend themselves. Indeed, as any small business owner who has been audit will no doubt testify, these procedures can be extremely stressful. The House of Representatives Small Business Committee held a hearing on this very matter last year. It heard how in some cases small firms had shut down as a direct consequence of an audit. As Steve Chabot, the panel's chariman, observed in his introductory remarks: "I know members of this Committee have heard from constituents who were audited so aggressively by the IRS that they had to close their doors. Others are engaged in protracted audits that seem like vague fishing expeditions, with no end in sight." So, rare praise for the Internal Revenue Service this week for its new commitment to expedite small business tax audits, limiting their length to a maximum of 60 days. That's still an awfully long time for a small business owner to sweat over the implications of an audit, with the prospect of penalties draining precious resources from their firm. But it's a slight improvement on the current situation nonetheless. At present, IRS guidance on small business audits doesn't offer taxpayers any clues as to how long a tax audit may take – not even a ballpark figure. Which hints at the terrifying prospect that one might be audited in perpetuity. So perhaps we should be grateful for this small mercy. Yes, it's fair to say that the IRS is not everyone's favorite arm of the US Government. But you could probably quite easily say that about any tax authority, anywhere in world.
    Source: http://www.tax-news.com/news/IRS_To_Provide_Expedited_Audit_Mediation_For_Small_Businesses____73783.html

  • Mar 21, 2017   United States: provokes

    However, judging by Germany's reaction to these proposals, it seems that the country is unsure what to make of them. On the one hand, a survey of German manufacturers by the Munich-based Ifo institute concluded that – and I quote directly from the English language press release – "companies do not seem to be over-concerned" by the proposed measures. Maybe something was lost in translation, because another report suggested that German business is "terrified" by the prospect of US border taxes. And against the backdrop of Chancellor Angela Merkel's keenly watched visit to Washington for talks with President Trump, senior figures in the German Government have begun to talk openly about the possibility of the European Union challenging the taxes at the World Trade Organization, should they come about. Germany is not the only one of America's major trading partners to talk in such terms however. Canada recently criticized the border adjustment idea, and, more ominously, China has said it would "respond" to any US border tax measure. What with we're not sure. But the fact that we don't know is part the problem. Nobody knows for sure whether the US will even proceed with any of its border tax proposals yet, which itself is fueling a great deal of uncertainty among multinational investors. But governments entertaining the possibility of a trade war doesn't help matters either. So, I'll end this week where I started, by extolling the virtues of collaboration. For taxpayers everywhere, it tends to produce far more positive results than confrontation.
    Source: http://www.tax-news.com/news/German_Manufacturers_Unconcerned_At_US_Border_Taxes____73746.html

  • Mar 14, 2017   United States: mobile

    Problems with outdated tax laws certainly aren't unique to the United Kingdom. The United States is another place where work patterns have left tax rules well and truly behind – in the haze of a car's tailpipe or the wake of airplane's contrail, you could say. Because, unbelievably, we are still in a situation where employees may be legally required to file an income tax return in every state in which they have conducted business, even if they were there for only one day. Surely the costs of administering such absurd rules routinely outweigh the amount of tax – if any – that is collected from mobile employees! But thankfully sanity may soon prevail. A bill has been reintroduced into Congress to standardize state income tax requirements for employees working out of their state of residence, and the measure has wide bipartisan support. However, those affected by such anachronistic rules shouldn't get their hopes up too much. These proposals have entered Congress before without being approved. And one gets the impression that House Republicans and the fledgling Trump administration have bigger fish to fry for the time being.
    Source: http://www.tax-news.com/news/US_Mobile_Workforce_Tax_Bill_Reintroduced____73679.html

  • Feb 15, 2017   United States: no-future FATCA

    With a Republican Congress, and a Republican (of sorts) in the White house, opponents of FATCA have probably never had a better opportunity to have the controversial law repealed. Indeed, the anti-FATCA lobbying campaign is already beginning to shift up a gear in Washington DC. For his part, President Trump has been silent on the matter. But observers suggest that his anti-big government, power-to-the-people, "America first" message places him firmly in the anti-FATCA camp. What's more, we can hardly expect a savvy businessman like Trump to accept a law that has cost billions to implement but will yield relatively small returns. We can only speculate about FATCA's future. However, obligations on US citizens to report foreign financial interests do not begin and end with this controversial law; there's also FBAR, and a multitude of other forms that must be submitted to the IRS bearing information about such items as foreign gifts and inheritances, and interests in foreign trusts, companies, and partnerships, among others. Will they be swept away in the tide of tax reform? To mainly conservative campaigners, FATCA is redolent of an age when individual privacy matters less and less, and governments feel entitled to pry into the activities of their citizens. Repealing it would therefore represent a major victory for their cause. But peel FATCA away and several layers of reporting requirements will remain.
    Source: http://www.tax-news.com/news/Campaign_Begins_To_Lobby_For_FATCA_Repeal____73432.html

  • Jan 09, 2017   United States: going boldly

    Across the pond now, and whether you believe the White House's claim that the tax policies of the President Barack Obama administration "saved" the US economy or not depends on which side of the political fence you stand. It would be harder, however, to argue in favor of any assertion that the tax code improved under the Obama's leadership. It is difficult to measure or quantify such things in a simple way, but I'm willing to bet that the majority of taxpayers would say that, at best, the US tax code is just a complex now as when President Obama was sworn in eight years ago. Most would probably reply that the situation has deteriorated. One of the reasons why the code was left to fester under Obama was that he was, for the most part, at odds with Congress on the matter. But Treasury Secretary Jack Lew hinted recently that comprehensive tax reform would have been difficult anyway, because of the lack of fiscal space, and because difficult political choices would have had to have been made. Indeed, he appears to suggest that the administration chose to take a pragmatic course with regards to taxation, rather than a bold or idealistic one. All that looks like it is about to change, however, if the results of a recent survey of chief financial officers is to be believed. Deloitte's quarterly CFO survey shows that the majority of respondents expect significant tax policy changes after Obama hands over to Trump later this month, with two-thirds anticipating a substantial corporate tax rate cut. This contrasts sharply with the results of other surveys of this type conducted before the election, which in some cases revealed deep pessimism about the prospect of corporate tax reform among business leaders. So, I suppose the moral of the story is, after a turbulent 2016, traditionally unthinkable political and legislative changes cannot be ruled out.
    Source: http://www.tax-news.com/news/CFOs_Optimistic_About_US_Tax_Reform_Survey____73150.html

  • Dec 28, 2016   United States: tax reform

    It is probably the case that the perception that large companies don't pay their fair share arises because corporate tax is a relatively small percentage of overall tax receipts in many countries now. For example, in the United States, corporate tax revenues accounted for 11 percent of total federal revenues in the 2015 fiscal year, while individual taxpayers contributed almost half. When looking purely at companies' corporate tax contributions, it is understandable that there is an ongoing debate about how much companies pay in comparison to individuals. However, the fact is that corporate tax has been diminishing in importance as a revenue stream for governments all over the world in recent years, as tax burdens have been shifted away from income and towards consumption. Corporate tax rates have also fallen sharply as countries compete for foreign investment. In which case, you could say that it is the fault of governments – and the legislatures that vote such tax cuts through – that companies are paying less corporate tax, rather than because of skulduggery by companies themselves. The United States looks set to follow the corporate tax downtrend after the Republican victory in November's elections – an event that may even trump (ahem) the UK's Brexit vote in terms of shock value. In a sense, cutting the federal corporate tax will be the easy bit. A headline rate of 35 percent may have been competitive 30 or 40 years ago, but it's not in an era of aggressive corporate tax competition, and Washington is largely agreed that a cut is long overdue. It's just a question of how much to cut it by. Proposals for some form of "border adjustment tax," on the other hand, may be a harder sell, especially in the form proposed in the tax policy blueprint published by House Speaker Paul Ryan earlier in the year. This proposed measure is designed to level the playing field for US companies penalized by foreign value-added tax and similar systems. But, even though the idea is intended to boost the US economy, it's a controversial one. For starters, US companies dependent on imports, such as retailers of apparel and consumer electronics, could be hit hard. Indeed, a coalition of business organizations has already been formed to fight the proposal in Washington. What's more, the measure could open a legal can of worms in terms of US obligations under world trade agreements.
    Source: http://www.tax-news.com/news/US_Business_Urges_Trump_To_Slash_Corporate_Tax_Rate____72852.html

  • Nov 24, 2016   United States: good for business

    Just look at what's happening in the United States. A Republican president with a Keynesian New Deal? You bet! A USD4.4 trillion tax cut that stands a half-decent chance of passing? Bring it on! A postcard for a 1040? Somebody wake me! The real significance here is not just that these things have been proposed – let's face it, on tax, we've heard it all before at the hustings, endless times – but that they have passed from the realms of the impossible to the eminently possible in the space of an election. Previously it was thought that some establishment Republicans would join hands with Democrats in Congress to block president-elect Donald Trump's more controversial measures. This might still turn out to be the case on some issues. But tax reform doesn't seem to be one of them. Indeed, for House Ways and Means Chairman Kevin Brady, it's almost as if Christmas has come early. The fellow seems to be chomping at the bit to get started — which is understandable. The next couple of years might be the only opportunity in a long time for Republicans to do this. So, for better or for worse, change is coming America's way on the tax front. Undeniably however, these changes will be good for corporate taxpayers. Tax reform legislation will likely combine elements of Trump's plan and the tax reform blueprint published by House speaker Paul Ryan in June, plus bits and pieces from the various Senate discussion papers on the matter. In which case, we are almost certain to see a corporate tax cut, and it will be just a question of how much. A move towards territorial taxation is by no means out of the question either. It is also probable that small, pass-through business, which make up the vast majority of all businesses in the US, will enjoy some sort of tax advantage too. Putting aside the issue of who will benefit the most from a Republican tax reform bill, many will argue that at the very least, it is time for a clear out of the code, which, according to Ryan, has grown from 26,000 pages in 1986 – the last time a tax reform of any significance took place – to 70,000 pages today. If Congress gets close to the 1986 benchmark, it will have done very well I suspect. Not so much a tax reform, as a tax revolution.
    Source: http://www.tax-news.com/news/Brady_Says_US_Tax_Reform_Will_Be_RevenueNeutral____72782.html

  • Oct 12, 2016   United States: sporting

    Now, on to a slightly more light-hearted matter: sport. And I can understand the arguments in favor of taxing America's Olympic athletes. After all, we are talking about men and women who are highly rewarded for their endeavors through such things as sponsorship and product endorsements, aren't we? Why should they get a tax break? Few other Americans, taxed as they are on their worldwide earnings, would. And anyway, isn't the Olympics about the joy of participation in sport, rather than the money you get for participating? Well, actually, no, not really. Aside from the fact that the amateur ethos that embodied the Olympic spirit has long since departed down the track, it's a generalization, to say the least, to assume that every single member of the 558-string Team USA at the Rio Olympics is rolling in cash. Yes, one would expect the higher end of the Olympic pay league table to be dominated by a small band of basketball players, golfers, tennis stars, and soccer players. But somehow I doubt whether archery, synchronized swimming, table tennis, Greco-Roman wrestling, and any other of the more obscure sports you care to mention are lucrative activities. But participants in the less glamorous sports no doubt work just as hard to try and get onto the podium. But this issue goes beyond one of merely the taxation of prize money and earnings. Did you know that the US Internal Revenue Service actually taxes the medals that athletes win too? Given that a gold medal isn't actually worth its weight in gold (because underneath it's mostly silver), and that a bronze medal is an alloy of various metals and worth about five bucks, the actual amount of tax due is small. There's a principle at stake though, and it just feels quite mean on the IRS's part to punish a lifetime's dedication to becoming the ultimate in sporting success with a petty tax bill. Which is why I support new legislation, approved by Congress last week, to prevent the IRS from taxing Olympic medals as well as cash prizes awarded to Olympic athletes. It's nice to see that a sense of fair play still exists in some quarters.
    Source: http://www.tax-news.com/news/US_Congress_Passes_Tax_Break_For_Olympians____72374.html

  • Sep 28, 2016   United States: mobilizing

    But if dealing with one tax administration isn't bad enough, try the United States, where of course tax doesn't stop at federal level because there are 50 states also waiting to ensnare unwitting taxpayers. At large companies operating across national and sub-national boundaries are largely able to cope with corporate tax compliance issues by employing teams of tax experts to figure out what the firm's tax obligations are and the best ways to fulfill them. However, for individual mobile workers, this issue can be very daunting and can even stretch the mental resources of companies that employ them. As the National Association of Manufacturers recently observed, the "increasingly mobile workforce is subject to an ever-changing hodgepodge of state tax laws, creating a compliance and fiscal nightmare for both companies and their employees on temporary assignments to other states." And if this problem currently taxes the resources of a company, just imagine how self-employed individuals must feel: overwhelmed and living in perpetual fear of audits and fines, I should imagine – which is hardly going to encourage inter-state commerce and innovation. So, the approval by the House of Representatives of the Mobile Workforce State Income Tax Simplification Act, which should hopefully substantially reduce these problems is certainly good news for mobile workers. However, these are by no means new proposals. They have actually been floating around Congress for a number of years, but without passing both chambers. Following House approval of the latest version of the bill, it was received in the Senate on September 22. But history suggests the chances of its final passage are low. And also, the timing of the referral isn't the greatest, with the Senate set to adjourn for the election recess on October 7. Doubtless mobile workers have learned to be patient by now. Strict enforcement by US states of tax residence rules has been characterized by some as a blatant revenue grab from mobile workers. But others have wondered if states are doing themselves more harm than good by doggedly sticking to the letter of the law. It would certainly be interesting to learn how much it costs states to enforce these laws, and whether that cost is outweighed by the additional revenues they collect. I suspect that there's not a lot in it. What's more, as mentioned, the economic impact might also be negative.
    Source: http://www.tax-news.com/news/US_House_Passes_Mobile_Workforce_Act____72284.html

  • Sep 19, 2016   United States: accountable

    You'd think in this new age of transparency, governments would be more accountable for their actions than they used to be. But apparently not. Which is why we have institutions like the Government Accountability Office (GAO) in the United States, to augment the work of Congress in holding the Government to account. And by all accounts, it seems to be doing a fairly good job, including in the area of tax administration. Indeed, barely a month goes by without the GAO calling out the Internal Revenue Service and other agencies for such things as lapses in protecting taxpayer information, ongoing vulnerability of systems to fraud, and various other forms of maladministration and wastage. While the GAO has no legal authority as such, the fact that it is able to expose administrative shortcomings is often enough in itself to bring about changes, and the IRS is known to act on its recommendations. Still, the GAO is no trifling operation itself with an annual budget of half-a-billion dollars and more than 3,000 full-time equivalent employees. Who's checking how that money is spent, or how all these staff members are performing, I wonder? Maybe it's time for a new watchdog, the GAOAO – the Government Accountability Office Accountability Office.
    Source: http://www.tax-news.com/news/GAO_Slams_Further_Obamacare_Verification_Lapses____72205.html

  • Aug 09, 2016   United States: expensive

    If anybody doubts the assertion that United States "tax expenditures" – credits, deductions, exemptions, and the like – are running out of control, they need only read the Washington-based Tax Foundation's latest report on the matter to see that they are wrong. As the Foundation's report points out, not all tax expenditures are bad. But it is clear that that tax code is packed full of dead wood – or pork in the parlance of Washington – and that stripping much of it away is long overdue. This is attested to by a truly staggering statistic – that the federal government will "spend" USD17 trillion on tax expenditures between now and 2025. That's almost as much as the entire gross domestic product of the United States in 2015. Tax expenditures are a fundamental reason why US taxes are relatively high, and highly uncompetitive, because tax expenditures need to be paid for somehow, and leaving corporate tax at 35 percent is probably politically more acceptable – and easier – than cutting the expenditures themselves, especially as the vast majority of tax expenditures benefit individuals. So any member of Congress who calls for their elimination is not going to be endeared to their constituents. Yet, it could be a risk worth taking. According to the Center for American Progress, repealing all tax expenditures en masse would enable Congress to cut taxes by 40 percent and still collect the same amount of revenue. That would result in the US having a corporate tax rate of 21 percent and a much more user-friendly tax code. Not that Congress has been unwilling to tackle the tax expenditure monster. But if the political will is there, it is going to be an uphill battle. Last year, Rep. Paul Ryan (R – Wisconsin) and Sen. Patty Murray (D – Washington) introduced legislation that would establish a 15-member commission to study how best to expand the use of data to evaluate the effectiveness of US federal programs and tax expenditures. And this would be before the debate actually begins on eliminating those tax expenditures deemed unworthy. The depressing conclusion to be drawn is that Congress remains at the base of the tax reform mountain.
    Source: http://www.tax-news.com/news/Tax_Foundation_Studies_US_Tax_Expenditure_Reform____71853.html

  • Jul 18, 2016   United States: praiseworthy

    The United States Internal Revenue Service is more often vilified than it is complimented. So when it does receive a rare piece of praise, it is worth pointing out. Apparently, the agency had a pretty good 2016 filing season. Although, as you'd expect from a review by National Taxpayer Advocate Nina E. Olson, there is considerable room for improvement. More than 25 percent of telephone inquiries to the IRS still go unanswered, many taxpayers remain baffled by a nightmarish tax code, and rates of fraud and error are still unacceptably high. Still, I've bashed the IRS often enough in this column, so perhaps it's time to go to its defense. After all, the IRS doesn't make the rules, Congress does; I'm pretty sure that the IRS doesn't ask to do more with less. But Congress and the Administration routinely demand this. And they do so in the knowledge that the agency's ever-expanding remit is stretching it to breaking point. Yet, the IRS's remit continues to expand. The agency was handed the task of Obamacare, and now has FATCA to contend with. Even more international enforcement programs are in the pipeline, promising to produce a mountain of information to be sifted through, like CbC reporting, and the Common Reporting Standard. One wonders though, where the agency's enforcement officers will find the time to read all of these reports. I foresee the midnight oil being burned in large quantities on Constitution Avenue.
    Source: http://www.tax-news.com/news/IRS_Praised_For_2016_Tax_Filing_Season_Performance____71656.html

  • Jul 11, 2016   United States: counter-intuitive

    Some economists and conservative economic commentators think that the United States for one should scrap its corporate tax. They believe that billions in offshore corporate earnings "locked out" of the US economy by existing corporate tax rules (which amounts to about USD2 trillion in total), would boost domestic investment, wealth, and incomes to the point that it would probably end up being a revenue-positive move for the Government. It would also eliminate the double taxation of company earnings – first at the corporate level and then in the hands of shareholders – and shift the US tax code's bias away from debt and in favor of equity. Another positive effect is that it would cut the incidence of tax planning and tax avoidance dramatically. Just think, there would be no more "ill-conceived" anti-inversion regulations laced with unintended consequences, and no more BEPS! Of course, such ideas are highly controversial, and by no means mainstream. Why, goes the counter-argument, should large corporations go without paying tax when they are benefiting from the protections provided by the social contract in much the same way as individuals? And it seems inevitable that governments would seek to make up the lost corporate tax revenue elsewhere, probably from easy targets like salaried workers, and through a multitude of stealth taxes. Nevertheless, this debate is food for thought. So, if governments aren't about to start repealing corporate taxes en masse, what is the appropriate level of corporate tax? How much tax, or what rate of tax, should a corporation pay in order to fulfill its side of the social contract? Naturally, it depends on what you believe, and on which side of the ideological divide you stand. Having noted this, it is undeniable that governments generally have recognized that high rates of corporate tax – over 30 percent is now considered "high" – are counter-productive, hence the recent downtrend in corporate tax rates. Governments in countries with high corporate taxes tend to aspire towards a rate in the mid-20s, and indeed the world average is now about 23 percent. Yet there is recognition that even though corporate tax is just one of many factors companies consider when weighing up one jurisdiction against another, corporate tax rates do have a powerful influence on these sorts of decisions. So you could argue the lower the better. Just look at how Ireland's 12.5 percent rate helped transform the country from European backwater to Celtic Tiger. Ah, but what about the race to the bottom? If nations keep trying to outdo each other on corporate tax – the UK is now considering a 15 percent rate, for example – at some point corporate tax will surely cease to become a meaningful tax anyway? We're probably a long way from that happening, especially in an era of OECD/EU hostility to "harmful" tax regimes. But there is probably plenty of mileage in the corporate tax cut tank yet. America for one has a lot of catching up to do.
    Source: http://www.tax-news.com/news/US_Firms_Brace_For_Major_Intl_Tax_Challenges____71601.html

  • Jul 04, 2016   United States: open

    Moving to the issue of international trade more generally, it's actually rather a bad time for supporters of free trade. According to a recent World Trade Organization (WTO) report, between mid-October 2015 and mid-May 2016, G20 nations applied 145 new trade-restrictive measures, or an average of almost 21 new measures a month, up from 17 in the preceding period. This is the highest monthly average of new trade restrictive measures registered since the WTO began its monitoring exercise in 2009. In addition, G20 states initiated 96 anti-dumping investigations in the most recent period for which data is available (June-December 2015), while 80 were initiated during the previous six months. Nevertheless, there have still been some glimmers of hope for free traders recently. One of them was confirmation by the South African Department of Trade and Industry that tariff-free access to the United States market will be granted to South Africa's farmers through 2025 under the African Growth and Opportunity Act (AGOA). AGOA allows almost all goods produced in AGOA-eligible countries (approximately 6,800 items) to enter the US market tariff-free, and for South Africa, the stakes of being kicked out of the AGOA scheme were high. According to South African Trade and Industry Minister Rob Davies, about ZAR25bn (USD1.5bn) of South Africa's ZAR70bn annual exports to the United States have been traded within AGOA, and he claimed that some 62,000 South African jobs were at risk prior to AGOA benefits being fully restored. Trade is of course something of a touchy subject in the United States at the moment, with presumptive Republican presidential candidate Donald Trump pledging to increase trade barriers with certain countries thought not to be playing by the rules, including China and Mexico. However, in this hothouse atmosphere, the current Administration has decided to expand its Generalized System of Preferences program to travel goods imported from Least Developed Countries and AGOA countries, which is something of a brave move, even if it will benefit mostly poor countries. We have also seen some major economies pledge to trade more freely in recent days and weeks: India and South Korea have agreed to enter into talks aimed at expanding their existing Comprehensive Economic Partnership Arrangement; and India and the member states of the European Free Trade Association (EFTA – Iceland, Liechtenstein, Norway, and Switzerland), have begun stock-taking talks following a pause in free trade negotiations. In fact, EFTA has been keeping its trade negotiators very busy recently. Since the beginning of the year, it has launched talks on expanding existing FTAs with Mexico and South Korea; progressed negotiations with Malaysia and Indonesia; concluded trade talks with Georgia; and signed an FTA with the Philippines. As the Brexiteers would say, who needs the EU!
    Source: http://www.tax-news.com/news/South_Africa_Guaranteed_US_AGOA_Access_Until_2025____71567.html

  • Jun 01, 2016   United States: can do

    The Miscellaneous Tariff Bill (MTB), passed by the United States Senate on May 10, is unlikely to be grabbing any headlines in an increasingly uncertain, volatile, and often violent world. But I thought it deserved a mention here if only because it shows that Democrats and Republicans can come together on tax-related issues. It's also refreshing to see a piece of legislation that will, hopefully, reduce trade taxes for US businesses, amid all the hubbub created by a certain presidential candidate's pledge to raise barriers to trade with China and Mexico. Ok, I know there's no point in protecting said candidate's identity, because we all know who I'm referring to! This is a highly charged political debate of course, involving as it does patriotism and economics, and this isn't the place to start indulging in Trump-bashing. But I will say that mixing nationalism with economic policy is rarely a recipe for success, and can often come back to bite the governments that carry them out (not to mention the people who suffer economically as result). Given what's happening in the world's steel markets, and the tit-for-tat, beggar thy neighbor measures and countermeasures being used to protect domestic markets, is hiking import tariffs on other products really a sensible move now or in the near future? I certainly don't think so. It's the sort of policy that strikes a chord when delivered to an appreciative audience at the lectern. But what's the plan B when these countries inevitably retaliate, forcing up input costs for domestic manufacturers and prices for consumers? For now, the US gets an encomium for the MTB, but this might have to be reviewed at a later date!
    Source: http://www.tax-news.com/news/US_Senate_Passes_Miscellaneous_Tariff_Bill____71218.html

  • Apr 18, 2016   United States: complex

    I didn't think it was possible for the US tax system to get much worse, but apparently it just has. To be precise, 1.6 billion hours worse for individuals and pass-through business owners. This is an astonishing amount of time to waste on compliance. Just think what mankind could achieve in 1.6 billion hours. To put this figure in an easier-to-grasp way, it's 66.6 million days, or almost 183,000 years. Roughly about the same time, in fact, as it has taken Homo sapiens to evolve. And this is just the additional time it took to file taxes in 2016 compared with 2015. The total amount of time spent was 8.9 billion hours. That's 370 million days, or 1 million years.
    Source: http://www.tax-news.com/news/Filling_US_Tax_Returns_This_Year_To_Take_89bn_Hours____70968.html

  • Mar 07, 2016   United States: spendy

    Not as much money as the US Government theoretically "spends" on individual income tax deductions though, I would have thought. That's equal to USD1 trillion per year, says the Tax Foundation, and that's just for the three major tax expenditures: the state and local tax deduction; the charitable contributions deduction; and the mortgage interest deduction. That's almost as much as the Internal Revenue Service collected in personal income tax receipts alone in 2014, which was just under USD1.4 trillion, according to the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. You can probably guess where I'm going with this! So, if these three personal income tax deductions were abolished, that would result in an almost 60 percent increase in personal income tax revenues, and dramatically simplify the individual tax code to boot. It must also be hugely expensive and time consuming for the IRS and taxpayers to administer these deductions. Of course, such a course of action would be extremely unpopular, so you'd have to cut federal income tax by an equivalent amount. That means instead of a top rate of tax of nearly 40 percent, the US could have a maximum rate in the mid-20s percent. Okay, it might be a simplistic equation, but it illustrates how taxpayers "pay" for their tax deductions through high rates of income tax, and that the removal of such deductions gives ample scope for a substantial tax cut. Many legislators and aspiring US presidents agree, and most of the current presidential candidates have proposed to do away with at least some personal tax expenditures in their campaign manifestos. However, while such proposals sound good on paper, and on the hustings, perhaps ultimately people are too attached to their cherished deductions now. It's going to take a brave politician to take them away, even if he or she cuts tax at the same time.
    Source: http://www.tax-news.com/news/Study_Quantifies_US_Itemized_PIT_Deductions____70613.html

  • Feb 15, 2016   United States: ultimatum

    Indeed, it's almost impossible now to conceive of a world without taxation in one form or another. States have simply become too big and all-encompassing, and they need feeding with vast amounts of revenue (as well as state borrowing) to keep them alive. Some people argue that governments should be a lot smaller, that they should butt out of people's lives unless absolutely necessary. Yet, we're never going to be completely free from taxes, because nations need to defend themselves, and bombers, frigates, and tanks don't come cheap these days. This is before we count the cost of training the men and women who operate them. And let's face it, we're never going back to the days when education was a purely private venture. Health care? Well, that's more debatable. But someone has to pay for roads to be built and maintained. Even if the construction and repairs are done by a private contractor, it's almost always the taxpayer who foots the bill. Same goes for the trash. And the street lights. Even in so-called no-tax jurisdictions, revenue has to come from somewhere, and usually it comes from company registration and license fees, and various sales, property, and excise taxes. I could go on, ad nauseum. However, just imagine, if you can, a country that did away with tax. I don't mean Dubai. True, it's almost a tax-free state for some, but even here, banks and oil companies pay tax at a fairly high rate. No, I mean the United States! I understand I'm wandering into the realms of fantasy here. But stay with me. What if Congress voted to cancel the tax code? Think that would never happen? Better think again! For a bill to cancel the US tax code by the end of 2019 has just gained its 100th co-sponsor. I should add that the bill comes with an important proviso: that Congress must agree on a tax reform plan before the appointed deadline to prevent the tax code axe from falling. So in essence it's a bill to focus minds on the seemingly intractable issue of tax reform, rather than a bill to cancel the tax code per se. And it probably won't pass. But still it got me thinking. US taxpayers spend more than 6bn hours and USD168bn per year completing tax filings, according National Taxpayer Advocate Nine E Olson's 2013 report to Congress. And things have probably got worse in the three years since. So what would they do with all that spare time and money if the federal tax code vanished? Indeed, those of us who make a living from the tax industry in one capacity or another would have quite a lot of time on our hands. Well, there'd be plenty of vacancies in the military, and I've always fancied having a crack at driving a tank. Ok, the nation would be more or less defenseless, but just imagine – no more sweating over your 1040.
    Source: http://www.tax-news.com/news/Bill_To_Terminate_US_Tax_Code_Gets_100th_Cosponsor____70415.html

  • Feb 08, 2016   United States: focuses

    Finally, it would be somewhat remiss of me not to mention the latest battery of anti-corporate tax avoidance proposals from the European Commission, especially as they represent probably the most serious attempt by Brussels so far to harmonize corporate tax in the EU. Indeed, even the most europhile member states in the heart of "old Europe" (France, Germany, Benelux et al) must have been taken by surprise by the ferocity of the Commission's recent attacks on member states' tax regimes. But, rather than do the predictable thing of chastening Brussels for its latest power grab over the tax sovereignty of European nations, I'm going to look at this from a different angle. If there's one good thing to come out of the EU's aggressive stance on tax avoidance, it's that minds are beginning to focus on tax reform on the other side of the Atlantic. Last month, we saw a bipartisan quartet of Senate Finance Committee members urging Treasury Secretary Lew to confront the EU over its state aid investigations, which involve some US multinationals. And more recently, House tax writers emphasized the need for US international tax reform in response to the European Commission's anti-tax avoidance package. I still think it fairly unlikely that any kind of tax reform bill, be it international, corporate, individual, or comprehensive, will get enacted this year. Even if the matter is being viewed with increasing urgency on both sides of the congressional aisle, there probably just isn't enough time to get it agreed. The House of Representatives is in session for less than a third of the year in 2016, which is also an election year. On the other hand, maybe it really is now or never. Imagine President Bernie Sanders trying to work with a Republican Congress on the economy. Or Donald Trump trying to convince Senate Democrats on tax and immigration reform. There's a danger that the political divisions will widen in 2017, rather than heal. And that's likely to spell paralysis rather than progress.
    Source: http://www.tax-news.com/news/US_Lawmakers_Push_Tax_Reform_After_EU_Action____70320.html

  • Feb 01, 2016   United States: out of credit

    Tax credits seem to be the answer to everything these days. Indeed, it seems that in many countries, no social or economic problem is too large that it can't be fixed with a tax credit. The United States is a particularly avid user of the tax credit; it uses them to help people to care for their children and elderly relatives, obtain health care, educate themselves, supplement their income, save for retirement, pay for a home, power their homes more efficiently, and buy environmentally friendly vehicles, among other things – and this is just the individual credits. I'm afraid I might lose you if I list the tax credits for businesses as well. On the face of it, tax credits seem like a marvelous idea. Who wouldn't object to being given a little financial help? But this is one of those rare occasions where I feel sympathy for the tax man, because for the poor old Internal Revenue Service, all these credits are a nightmare to administer. Tax credits are complex creatures because of the eligibility tests needed to ensure that they are claimed by the people or companies they are supposed to be claimed by. Consequently, they are prone to erroneous and fraudulent claims. For instance, the IRS was recently lambasted by the Government Accountability Office for conducting "minimal" oversight of the Low-Income Housing Tax Credit, available to private developers. It was also criticized by the Treasury watchdog TIGTA last May for allowing an estimated 3.6m taxpayers to receive more than USD5.6bn in potentially erroneous education tax credit claims in 2012. And we routinely hear that the agency is struggling to get to grips with Obamacare tax credits, while the scale of Earned Income Tax Credit fraud is truly staggering: almost a quarter of EITC payments in 2013 were improper, bleeding the Treasury of USD14.5bn, according to TIGTA. So what's the answer to the tax credit conundrum? Why, more tax credits of course! Just last week, President Obama proposed a new tax credit to encourage a higher take-up of workplace pension schemes. Hilary Clinton plans a slew of new tax credits if she wins this year's presidential race, including credits to encourage employee profit-sharing, to promote investment in economically depressed areas and to defray the rising cost of healthcare. But it's not only Democrats who are possessed with a tax credit mania. Jeb Bush wants to replace Obamacare with a new health tax credit, and credits have been enacted under presidents of both political stripes in recent years. Predictably, some candidates on the right, such as Ben Carson, want to do away with tax credits as part of root-and-branch tax reform plans. However, the easy bit is giving people tax credits. Taking them away again is the hard part, as British Finance Minister George Osborne found out to his cost recently. Indeed, I think I can still see some egg on his face.
    Source: http://www.tax-news.com/news/New_Tax_Credit_Under_Obamas_New_IRA_Plan____70281.html

  • Jan 25, 2016   United States: suspicious

    And now to a country where influential lawmakers aren't so shy about challenging prevailing opinion on matters of international taxation: the United States. The US Government insists that it is fully supportive of the OECD's work in the area of BEPS. However, unlike some other major economic powers, it has hardly been singing its praises to the rafters either. Indeed, one gets the sense that Washington wasn't the most enthusiastic participant in the consultations that led to the OECD's recommendations. We certainly know how some – mostly Republican – sections of Congress feel about it. They see BEPS as an extraterritorial raid by foreign tax authorities on US taxpayers and a likely drag on the US economy. And they want the Government to put up a sterner defense of US interests and question the motives of the OECD and foreign powers. But it's not only Republicans who feel this way. As we saw recently, a quartet of Senators – two Republicans and two Democrats – urged the Treasury to stand up for US taxpayers against the EU in its controversial state aid investigation into national tax rulings, some of which affect US companies. Admittedly, it is a bit rich of America's politicians to complain about the extra-territorial effects of BEPS and the EU's corporate tax agenda when the US foisted FATCA on the world. However, someone has to do it, and they don't come more powerful than Uncle Sam.
    Source: http://www.tax-news.com/news/US_Treasury_Urged_To_Act_On_EU_Tax_Ruling_Probes____70197.html

  • Jan 18, 2016   United States: dumped

    From virtuous circles to washing cycles. I never thought I'd see the day when I'd use this column to discuss the price of washing machines. But there's a first for everything! Actually, washing machines are subsidiary to the main issue at hand: trade. And, more specifically, the practice of "dumping." And to be precise, the "dumping" of washing machines into the US market. The World Trade Organization took part in 233 new anti-dumping investigations from July 2014 to June 2015. So at any given time, there are numerous anti-dumping investigations taking place the world over concerning all manner of traded goods, from bicycles to biofuels. Hence, the wider public rarely gets to hear about such trade disputes unless they are of particular economic significance, such as the allegations that China is dumping steel into various steel-producing nations. Nevertheless, this particular story caught my eye because of something that was said in support of the proposed imposition of anti-dumping duties that Chinese washers are being sold in America at less than Chinese domestic market prices. This could be because the Chinese Government is subsidizing the makers of washing machines in one form or another. However, the reason that American firms are being undercut could stem from the fact that Chinese producers are able to offer cut-market-price deals as they can make washers more cheaply! Heaven forfend! I can't help but feel it seems at odds that the US, a bastion of the global capitalist system, feels the need to so frequently protects its industries from such competition.
    Source: http://www.tax-news.com/news/US_Initiates_Washing_Machine_Trade_Investigation____70126.html

  • Jan 11, 2016   United States: dares to dream

    It'll never happen of course. No, I don't mean Angela Merkel inviting Silvio Berlusconi to Baden-Baden for tea and gateaux. I mean Ben Carson's proposed tax reform plan. As if the idea of a flat tax of 14.9 percent (not even a nice, round, 15 percent) wasn't radical enough, his tax blueprint would actually, in his own words, "repeal the entire tax code." There'd be no more troublesome income tax deductions and other "loopholes" under a Carson presidency, and we would also kiss goodbye to the taxation of capital gains, dividends, and interest at the individual level so that a person's income is only taxed once. Indeed, it all makes Jeb Bush's proposed Reform and Growth Act sound timid by comparison. I've long thought it scandalous that governments get three bites at the cherry, first from your income, then from your savings and investments, and then a third mouthful after you die. But Carson's plan, which he says will boost US gross domestic product by an enormous 16 percent over 10 years, is surely too good to be true. For the time being at least, Congress will struggle greatly to pass even a modest tax reform bill to cut America's 35 percent corporate tax by just a few percentage points, let alone agree a more comprehensive one, even though almost everyone agrees this is necessary. However, what I like about some of the outlandish tax proposals of presidential candidates past and present is that they show how America's aspiring leaders are prepared to think outside the box, to dream of a better future (and, of course, get votes). And after all, that's at the core of American beliefs, isn't it? Making the seemingly impossible possible? Achieving the dream? We rarely see such ambition from politicians in other major economies. Even if there is a gap between ambition and reality in Carson's plan, the beauty of democracy is that things can change fairly dramatically if the electorate wills it. Who knows, maybe the stars will align for pro-growth tax reform from 2017.
    Source: http://www.tax-news.com/news/Jeb_Bush_Sets_Out_His_US_Tax_Reform_Plan____69120.html

  • Oct 19, 2015   United States: do the math!

    If Ireland is one stubborn so-and-so, with its dogged commitment to low corporate taxation, then it must have an equal in the US Treasury Department, with its equally single-minded commitment to the flawed FATCA law. But what's this? Praise for the Internal Revenue Service? For FATCA? I'm afraid so, but not from me I hasten to add. It came in an analysis from the Treasury watchdog, the TIGTA, which generally commended the way the IRS went about the task of implementing the legislation. And I have to admit, begrudgingly of course, that I do have a sneaking admiration for the way the IRS has made possible what many including me thought was an unworkable and unenforceable law when it was enacted five years ago. However, that's about as far as I'm prepared to tip my hat where FATCA is concerned, for, as long-time readers of this column will know, I'm no fan of this over-bearing, extra-territorial piece of legislation. Tax evaders should be caught, of course but at what price? Well, as far as FATCA is concerned, I'll tell you what price: about USD7bn and counting. That's roughly how much financial institutions around the world have spent complying with this law, and that is probably a conservative estimate. (And we don't know yet how much the world's tax authorities have spent to adapt their systems). We do know, however, that the revenue from FATCA is estimated to be less than USD1bn, and probably closer to USD700m. But, for governments, it's not so much about the money anymore; it's about information, and more specifically information about people, which is fast becoming the new, unofficial currency.
    Source: http://www.tax-news.com/news/Rare_Praise_For_IRS_For_FATCA_Work____69423.html

  • Oct 12, 2015   United States: defiant

    It is claimed that the BEPS project is a global initiative, built on a worldwide consensus of OECD and G20 members, and other key economies. That's true to the extent that these countries are regularly heard to pay lip service to the work of the OECD in all its anti-tax avoidance endeavors. But when you look a little closer, there are stark similarities between the OECD's work and Europe's vision of what worldwide corporate taxation should look like. Perhaps this is not surprising, as, after all, the OECD and its 2,500-strong team of technocrats, administrators, and academics are based in Paris. Indeed, Pascal Saint-Amans, one of the main supervisors of the BEPS project, is a former French civil servant. And the fact that 25 of the 34 OECD member countries are in Europe will naturally give much of the OECD's work a European flavor. Some of the BEPS proposals reflect recent EU tax initiatives, particularly with regards to corporate transparency, VAT on digital services, and harmful tax regimes. This could be the BEPS project's downfall; some countries don't like the European high-tax, big government way of doing things. And when Europeans come preaching their brand of social democracy, hackles rise in Washington. True, we're talking about a Government that foisted FATCA on the world, but there seems little appetite in the current administration for the BEPS project, judging by the comments of Robert Stack, the Treasury's deputy assistant secretary for international tax affairs, who professed his "extreme disappointment" with the BEPS outputs at the OECD Tax Conference in Washington in June, adding that he was "shocked and appalled" at the attitude of tax administrators and their thirst for more power over taxpayers. Orrin Hatch's and Paul Ryan's recent comments on BEPS would seem there'll be even less appetite for the OECD's BEPS recommendations if a Republican President joins the GOP majority in Congress from 2017.
    Source: http://www.tax-news.com/news/Concerns_Expressed_In_US_Over_BEPS_Plan____69362.html

  • Sep 29, 2015   United States: unenlightened

    One government that has expressed concern about India's tax laws is the United States – quite ironic given the state of the US tax code. Indeed, the US itself is no stranger to retrospective law making. Congress does it every year or two, to renew an assortment of temporary tax breaks – some quite significant (the R&D tax credit) and others more obscure (the rum excise tax "cover over"). These are known as the tax extenders. And it's that time of year again, when Congress gears up to debate, and hopefully pass, these provisions. Indeed, it's almost become an end-of-year ritual now, and the congressional calendar would look rather bare without it. We'll doubtless see both sides proclaim that it's time to put an end to such law-making on the hoof. But then they'll fall out over revenue offsets and use the package as a vehicle to score political points, before passing legislation at the last possible minute and kicking the can down the road for another year. Expect plenty of heat and light but not much enlightenment.
    Source: http://www.tax-news.com/news/Permanent_Tax_Extenders_Pass_US_House_Markup____69202.html

  • Sep 07, 2015   United States: IRS in crisis?

    I believe that one tends to make one's own luck in this life, generally speaking. So what did the US Congress expect when it created a tax super-authority but refused to fund it as such? Lawmakers regularly express surprise and shock at the rate that the IRS is bleeding tax revenue through tax refund fraud and erroneous tax credit claims (a quarter of Earned Income Tax Credits worth USD14.5bn were paid in error in 2013). Many words of indignation on this have been expressed in sternly written letters to IRS Commissioner John Koskinen, the latest coming from Senator Ron Wyden, the senior Democrat on the Senate Finance Committee, but poor Koskinen isn't a miracle worker. Indeed, the nation's top taxman is an unenviable position to be in: despised by taxpayers, and chastised by your political masters. Nobody seems to be using the word "crisis" when discussing the IRS's workload, which now includes administering President Obama's labyrinthine health care legislation, but this must be an institution close to breaking point. The problems won't be solved overnight but they're not insurmountable. Basically, there are two options: increase IRS funding; or reduce the size of the State, thus reducing the IRS's ever-increasing remit. Trouble is, the Republicans oppose the former while supporting the latter, and the Democrats vice versa. So, for the time being, it is likely that the agency will continue to lurch from one scandal to another. Still, having said all this, it's impossible to say without conducting a thorough audit of the agency's activities whether the IRS is making the best of a shoestring budget, or is guilty of extravagant waste. It's worth remembering that its budget is still about USD10bn a year, a sum larger than the gross domestic product of about 30 countries. If the first case is true, that'd be some luxurious shoestring!
    Source: www.tax-news.com/news/Wyden_IRS_Budget_Cuts_Affect_AntiFraud_Capabilities____69072.html

  • Aug 03, 2015   United States: innovative

    Speaking of antediluvian things, I now turn my attention to the US corporate tax code. Ok, it's not quite the ancient relic that this adjective implies, but it's probably fair to say that the US corporate tax system is at least 30 years out of date (the last major reform of the US tax code took place in the mid-1980s under President Ronald Reagan). It's certainly not fit for purpose for the intangibles-based digital economy of the 21st century. Frankly, most tax codes probably aren't either. But at least some governments noticed which way the wind was blowing some years ago and have tried to adapt their antiquated tax systems to new realities by inventing special tax regimes to encourage the development of intellectual property. Ironically, given that Europe is often seen as one of the least competitive places in tax terms, a number of EU countries have led the way in this area. Belgium, Ireland, Italy, Hungary, Luxembourg, the Netherlands, Spain, and the United Kingdom have put in place or are considering the introduction of innovation or patent "box" regimes, under which IP-related income is subject to a deduction for tax purposes, or a special, usually much lower, rate of corporate tax. Interestingly – yet at the same time somewhat unsurprisingly – Ireland, the Netherlands, and Luxembourg were among the handful of "low-tax" territories where US corporations shifted USD600bn in income in 2012, according to a recent analysis by the Congressional Research Service. Now the US – or at least some members of Congress – is trying to turn the tables, with a legislative proposal for a United States "innovation box." Given that comprehensive tax reform is impossible at the moment, and probably will be for at least another 18 months, this could represent the next-best solution and certainly might be a more effective means at unlocking some of the estimated USD2 trillion in income held abroad by US multinationals than special repatriation taxes. It's quite refreshing to see that the innovation box proposal has bipartisan support too. It probably won't get the OECD's support, however, given that patent boxes by their very nature encourage corporations to shift profits from one jurisdiction to another. However, if the Republicans manage to achieve a clean sweep at next year's elections, it's hard to see the US kowtowing to the OECD, the EU, or anybody else on international tax policy anyway.
    Source: www.tax-news.com/news/Debate_Begins_On_US_Innovation_Box_Proposal____68740.html

  • Jul 07, 2015   United States: fast track

    I never thought I'd see the day, at least in the remainder of President Barack Obama's second term, when Democrats and Republicans would agree on a piece of legislation vital to the United States' economic interests. But there was an uncharacteristic bout of bipartisanship in Washington last week as Congress passed the long-awaited renewal of trade promotion authority (TPA) legislation. Without TPA, also known as fast-track, contentious free trade agreements could be filibustered in Congress, so there would probably be no Trans-Pacific Partnership. Actually, it is stretching the truth somewhat to suggest that TPA was approved in a spirit of total political harmony. For many months, senior Democrats in the Senate put up a good fight against a bill they argued would allow unbalanced free trade deals to be rammed through Congress without adequate scrutiny. Indeed, the real acrimony here was between Democrats and their own President rather than the usual Democrat versus Republican, left wing versus right wing narrative we have become so used to. In fact, I'm struggling to remember an occasion during President Obama's two terms when the White House and the GOP were so closely aligned. Given the President's protectionist utterings in the early phase of his presidency, it is also remarkable how far he has moved on the issue of free trade. He has therefore proved that he can be flexible. Perhaps it's now time he softened his stance on other issues, like tax reform, so he could be remembered as a President who got things done, instead of a leader paralyzed by his own stubbornness. Probably too late for that now though.
    Source: www.tax-news.com/news/Congress_Finally_Passes_US_Trade_Bills____68465.html

  • May 18, 2015   United States: against the grain

    Warning – some of you may find the following pun offensive (or at least just plain unfunny). But it seems rum of me, for someone with my reputation for indulging in a tipple after a hard day at the office, to criticize an attempt by lawmakers to provide tax relief for a drinks maker. Especially as I complain so frequently that without regular drinkers the treasuries of the world would be almost dry (I suppose that counts as another pun). But the proposal to cut the tax bills of Kentucky's bourbon producers, while laudable, in a way symbolizes all that has gone wrong with the US tax code (and other nations' tax codes, come to that). Tax expenditures, or, in other words, special interest tax breaks like the one being proposed here, are estimated to cost the US Treasury some USD2 trillion per year in revenue foregone, and they are one of the main reasons why some taxes in the US, notably corporate tax, are so high. The fact that this tax break is being proposed by two Republicans who support comprehensive, pro-growth tax reform, designed to sweep away special interest tax breaks and allow tax rates to be cut, more or less confirms my fear that such reform will be almost impossible to achieve in the US. So why have the pair responsible for introducing the legislation in Congress gone against the grain (ahem) in this way? Well it isn't that hard to figure that one out when you realize which state it is they represent. No prizes for guessing it starts with a "K." And no, it's not Kansas.
    Source: http://www.tax-news.com/news/US_Tax_Break_Bill_For_Bourbon_Producers____68044.html

  • Apr 09, 2015   United States: mostly free

    As I wrote in this column recently, there is still some merit in the claim that the United States is the greatest country on earth – the millions of people who have been naturalized as US citizens over the past few years, dwarfing the number handing their passports in, attests to that. Yet, the US is ranked in 12th place out of 178 countries receiving a score in the 2015 Heritage Foundation/Wall Street Journal Index of Economic Freedom. As a result, it is regarded as only "mostly free" rather than just plain "free." It is perhaps a surprising conclusion given that the US is supposed to be the Land of the Free. But the Heritage Foundation has observed what it terms a "precipitous downward spiral" in US economic freedom since 2008. Can it be a coincidence that this period coincides mostly with President Barack Obama's one-and-a-half terms in office? If you believe the rest of Heritage's overview of the situation, then it's unlikely. "Increased tax and regulatory burdens," Heritage notes, "aggravated by favoritism toward entrenched interests, have undercut America's historically dynamic entrepreneurial growth." Alarmingly, while President Obama's second-term efforts to increase tax and spending and expand regulation have been largely thwarted by Republican opposition in Congress, Heritage cautions that corruption in government remains "a concern." High levels of government spending and the expansion and complexity of the Government's regulatory agenda "have increased opportunities for political favoritism and cronyism," the Foundation claims, while it says there have been uneven protection of property rights and numerous instances of regulatory overreach by the Administration. The Foreign Account Tax Compliance Act (FATCA), a regular target for opprobrium in this column, is certainly one example of latter. So too is the use by law enforcement agencies, including the criminal investigation branch of the Internal Revenue Service (IRS), of civil forfeiture, which only came to light last year after an expose by the New York Times. It's amazing how this situation, which, to put it bluntly, amounts to legalized theft of private property by the state, came to pass in a country which prides itself – and rightly so – on the limitations on Government provided for in the US Constitution. But it serves to highlight the apparent disconnect that has opened up between the private economy and a bureaucracy with a propensity to interpret the law in any way it sees fit. And the USA is by no means the only advanced country where this is happening. Thankfully, it's not all bad news. I'm writing this lament in response to the announcement of new limitations on the use of the Civil Asset Forfeiture Act of 2000 by law enforcement. Not that the new measures – if they can be called that – go far enough; as Congressman Peter Roskam (R – Illinois), who chairs the House Ways and Means Subcommittee on Oversight, pointed out, the application of the new restrictions relies on the DOJ's current system of "just trust us" rather than binding statute. It's a step in the right direction though, I suppose.
    Source: http://www.tax-news.com/news/US_DOJ_Restricts_IRS_Use_Of_Civil_Asset_Forfeitures____67725.html

  • Mar 05, 2015   United States: Internal Everything Service

    It's little wonder that the United States Internal Revenue Service is providing the worst level of service in its history – well, that is, since such things began to be measured at any rate, which was actually only 14 years ago. You only need to look at the additional responsibilities successive administrations have piled onto the much-maligned IRS. It's no longer merely a revenue agency, but is also a welfare agency and an enforcement agency, besides other things. President Obama has been especially guilty of expanding the IRS's remit, primarily with his health care reforms. Obamacare makes more than 40 changes to the Internal Revenue Code in its quest to raise money to pay for the structural changes to the US health care system and to provide the subsidies for individuals that the legislation is meant to protect. Given that the Code is now said to stretch to more than 5,000 pages, this sounds like an insignificant number. But Obamacare has only just begun, and already we are seeing evidence that the IRS isn't coping at all well with the additional workload, having sent incorrect information to an estimated 800,000 taxpayers who purchased health insurance on the federal health marketplace. Indeed, about one-half of those taxpayers who received an overpayment of the tax credit, due to miscalculations by the IRS, have already paid some of it back. And it's not as if the agency doesn't have form: about one-quarter of all Earned Income Tax Credit payments made in the 2013 fiscal year were paid in error, according to a recent report by the Treasury Inspector General for Tax Administration. That's a USD14.5bn mistake. Some, like National Taxpayer Advocate Nina E Olson, say that the IRS's failings are a result of underfunding. I'm inclined to agree. But at the same time, merely throwing more money at the agency is not the solution. The IRS now has a budget of just short of USD11bn and a staff roster the size of a small city, despite recent reductions in personnel. Maybe it's time to downsize this jack-of-all-trades to what it does best: collect taxes. That said, the US is by no means the only country with a supercharged tax department; more and more governments are using their revenue agencies to roll out new welfare systems. So I don't hold out much hope of this happening any time soon.
    Source: www.tax-news.com/news/IRS_Providing_RecordLow_Taxpayer_Service____67401.html

  • Feb 19, 2015   United States: still great

    A record 3,415 people handed in their US passports last year. That's an average of just fewer than 10 renunciations per day. Which, in a country with a population of almost 320m people, is a miniscule amount. I put the latest expatriation statistics into context like this because they tend get a lot of attention, and undeniably the numbers have been rising every year for the last few years. Some anti-government commentators are quick to seize on these figures as evidence of increasing dissatisfaction with the Obama Administration and its heavy-handed tax measures like FATCA. That may well be the case, and I'm certainly no fan of FATCA, nor of President Obama's policies on tax in general. But it's hard to say what the real reasons are for expatriation without asking the people who handed in their passports themselves. There could be any number of motives. So for the first time in a while, I'm going to stick up for the United States. US citizenship remains one of the most prized possessions in the world, and millions of people all over the globe are willing to suffer great hardship to obtain it. This reflects the fact that, in spite of its broken tax code, the American Dream is still eminently possible to achieve if you want it hard enough. To support my argument, here's another stat: in fiscal year 2014, 654,949 people were naturalized as US citizens. They added to the 777,416 people who were naturalized in 2013. In fact, in the last decade, the US has welcomed 6.6m new citizens. It can't be that bad. Finally, I can't sign off this week without mentioning BEPS, and the G20's latest commitment to support the project in its entirety. Not that there's anything really new to say here. But it is highly ironic that while the G20 praises the OECD's BEPS work to the skies on the one hand, it is undoing it with the other. Not as a collective as such: but several of its constituent member countries are guilty of pre-empting the final BEPS recommendations by introducing new international tax avoidance measures, which is precisely what the OECD hopes to avoid. And according to a new report from EY, this is not happening on a small scale. Its conclusions point to striking national policy shifts on BEPS matters, with 40 percent of respondents to a new survey noting "significant" tax reform activity from their nation's government. More worrying perhaps is that the OECD seems genuinely baffled by this phenomenon, as if it can't believe governments are using the BEPS project as an excuse to dream up new taxes. Still, it's not that surprising things are turning out the way they have. The OECD doesn't have any legal powers. It can only persuade and cajole. It can't force or compel countries to do things. It might be able to push little IOFCs, mere specks on the world map, around. But it looks as if it has bitten off considerably more than it can chew this time.
    Source: www.tax-news.com/news/Another_Record_Year_For_US_Expatriations____67246.html

  • Jan 22, 2015   United States: Dr. Taxman

    All in all, it's been a pretty bad couple of weeks for the United States if you believe, as I do, that small government is preferable to big government. On January 12, the Internal Revenue Service (IRS) announced that foreign financial institutions and national tax authorities could begin enrolling in its International Data Exchange Service (IDES), the mechanism through which information on the bank accounts of US citizens will be transmitted to the IRS under the insidious FATCA legislation. "But why are so against FATCA?" I hear you ask. "FATCA will root out tax dodgers, therefore, you must support tax dodging!" No, I don't condone tax dodging at all. But I certainly do value individual privacy, and FATCA tramples all over it to find what is likely to be a relatively small handful of Americans who forgot, couldn't be bothered, or wilfully neglected to fulfil their tax obligations to Uncle Sam. At any rate, don't you think that those who fall into the third category and are determined to remain there saw FATCA coming (they had plenty of warning) and have made alternative financial arrangements? We might not ever know, but I'll bet they have. A few days earlier, on January 8, the Treasury Department and the Department of Health and Human Services (HHS) announced that they will provide individuals with additional information and resources to help them report their health insurance status for the first time on their 2014 tax returns. On their tax returns? This sounds all very nice of people at the Treasury and the HHS, but it's starting to look like the IRS is staging a gradual takeover of US Government functions after having had its remit expanded massively by Congress in recent years. "Mission creep," they call it in bureaucratic circles. Or in the case of the IRS, "mission leap" might be a more appropriate description of the moment when the agency was tasked with administering large swathes of the largely tax-funded Affordable Care Act. With its 50 or so revenue provisions, the ACA is as much a piece of tax legislation as it is a reorganization of the US health care industry. And the taxes range from the whacky (the belly button tax?) to the sinister (the Orwellian-sounding "shared responsibilty payment"). Nevertheless, I'm not really sure what to make of Obamacare yet. Something needed to be done to lower the cost of healthcare, but the ACA just feels messy, with its 1,000 pages of legislation and tentacles stretching into all sorts of unlikely places. Free marketeers point to the failings of the UK's NHS as an example of why governments should butt out of health care. But, funnily enough, the Brits, who by and large are very proud of their health service, point to the failings of the almost-totally-private system that operated in the US pre-Obamacare to justify massive government spending on health. I suppose somewhere in between the two the answer must lie. Although, to be perfectly honest, I'd prefer to keep the taxman out of matters to do with my health.
    Source: www.tax-news.com/news/IRS_Sets_Up_FATCA_Data_Exchange_Service____66962.html

  • Jan 15, 2015   United States: dynamic

    Another good day for an elected chamber was had in the United States Congress last week after the House of Representatives voted overwhelmingly in favor of "dynamically scoring" major new tax legislation. In essence, dynamic scoring means that the likely economic consequences of tax reforms are factored in to calculations on their future revenue effects. Almost unbelievably, the Congressional Budget Office and the Joint Committee on Taxation currently use "static" revenue estimating techniques, which make the assumption that tax policy changes – regardless of their magnitude – have no impact on the economy's performance. Under such an assumed scenario, tax cuts are inevitably going to lead to falls in revenue, which is perhaps one of the major reasons why it has become virtually impossible for Washington to have a sensible debate on the issue of tax reform. Any measure put forward by Republicans which is expected to reduce the US tax burden will merely give President Obama and Democrats the opportunity to press the buzzer labeled "fiscally irresponsible." But you don't need a doctorate in economics to know that a significant change to tax rules has the potential to influence the behavior of businesses, investors and workers, and ultimately change the workings of the economy itself. And this works both ways. I've heard it said many times by both employed and self-employed people that as they pass a higher tax threshold, and marginal tax rates surge over 50 percent, there seems little point in putting in the extra hours when only the Government seems to benefit. Conversely, it's no coincidence that we all get excited at the prospect of a tax cut, because we won't be punished so much for working or taking a risk, and we can spend more of our money on stuff in the shops (or going to Annabel's). Economies are hugely complex things of course, and the variables affecting a country's economic performance are legion; it's not necessarily a given that governments will recoup revenues lost from a tax cut through higher economic growth. The trouble is, for Democrats, dynamic scoring smacks rather too much of Reagan-omics, underpinned as it was by the works of eminent supply side theorists like Arthur Laffer and his famous curve. But Sander Levin's claim that tax cuts never pay for themselves surely belongs well in the past, and such attitudes may partly explain the Democrats' dismal showing in last year's mid-terms.
    Source: www.tax-news.com/news/Dynamic_Scoring_Approved_By_US_House____66923.html

  • Dec 22, 2014   United States: blue skies thinking

    It would be all too easy to execrate the United States for yet another fine mess Congress has made of the tax code, after the House of Representatives and Senate managed to agree an effective two-week renewal of a ragbag of around 50 tax provisions. (Most expired at the end of 2013 and have been renewed retrospectively to the end of 2014.) Yes, it's bad, but we all expect it now, and in a way things can only get better. It's the season of goodwill, and I want to be optimistic that Congress, with its Republican majority for the next two years, will really grasp the nettle and consider some radical tax reform proposals, like a federal consumption tax or value-added tax, as Senator Ben Cardin (a Democrat) has. Some might question whether such outlandish proposals are really necessary. The US economy is ticking along quite nicely, despite the mangled state of the tax code. However, with most arguments against a federal sales tax being that it would be regressive and would risk dampening consumer sentiment, Senator Cardin's proposal tries to make things more progressive, albeit through a consumption tax rebate for low- and middle-income earners that to my mind introduces complexity into a system meant to be simpler. So, certainly, there are plenty of problems with a new consumption-based tax system, and it will probably never happen in my lifetime. But the likes of the IMF keep telling Governments not to rely so much on taxing incomes, and to tax consumption instead, so there has to be some merit in it; anything has to be better than the dog's breakfast we are presented with now. I have a friend who frequently complains to me about the amount of time he spends with his CPA in order to make sure his tax affairs are in order – time he'd rather spend running his company. His company's tax return now resembles a book, yet he still lives in fear of an IRS audit. How did we get to this? Tax is now almost a science, but scientists don't generally get fined, bankrupted, or thrown in jail if they get their equations wrong. Just imagine the restorative effect that a completely new way of taxing – and one that doesn't rely on incomes – could have on the economy. The US political system can be maddening at times, but at least Congress has the ability to think out of the box: a world without tax returns – now I'm dreaming, but wouldn't that be something?
    Source: www.tax-news.com/news/US_VAT_Proposal_Floated_In_The_Senate____66719.html

  • Dec 11, 2014   United States: extending

    "Better late than never" you could say about the UK deficit situation. And you could use the same phrase to describe legislation passed by the US House of Representatives renewing a package of expired tax breaks almost in their entirety. It is something that should have been done a year or more ago before the expiry of the measures at the end of 2013. That they weren't renewed, and haven't been in the meantime, tells you all you need to know about the polarized, paralyzed nature of US politics. Yet, the large majority in favor of a simple one-year extension of most of these tax breaks informs us that both sides can come together when they have to, making the previous period of damaging legislative brinkmanship look so unnecessary. As if complying with the tax code wasn't hard enough for those taxpayers with relatively simple tax affairs, the Internal Revenue Service warned in November that continued delay in enacting a tax extenders package would not only cause heightened uncertainty for those taxpayers who are affected by the expired provisions, but also raise operational and compliance risks that would delay the tax filing season and the processing of individual taxpayer refunds. It has to be said that President Obama has been especially obstinate since the Democrats received a shellacking in the mid-term elections, stubbornly rejecting any Republican proposals out of hand, and slapping down Senate Majority Leader Harry Reid (a Democrat from Nevada) when he began negotiating with the GOP on an extenders' compromise. The indications are that the Senate will probably pass this short-term fix, and, so as not to cause more uncertainty, the President will not wield the veto. But you can virtually guarantee that we'll be watching the same pantomime unfold next year – and possibly well into 2016 – when the extenders expire yet again. It's a habit Washington has to kick.
    Source: www.tax-news.com/news/House_Passes_OneYear_US_Tax_Extenders_Renewal____66607.html

  • Nov 06, 2014   United States: uncivil

    I've written before about how Her Majesty's Revenue and Customs is determined to tear up the Magna Carta in the year of its 800th anniversary by taking money and property before an offence has even been proven. Now its America's turn. As if FATCA wasn't bad enough, the Internal Revenue Service is making liberal use of CAFRA - the Civil Asset Forfeiture Reform Act of 2000 - to extract money and property from taxpayers it suspects of tax evasion. And "suspects" is the operative word here. Originally intended to help the Government bear down on the money laundering activities of drug traffickers, fraudsters and other undesirable criminal types, in essence this law targets "structuring," a practice whereby offenders make a series of small payments into a bank account to forestall the mandatory report that banks have to make to the Treasury on transactions of USD10,000 or more, thus in theory enabling said offending criminals to remain under the Government's radar. "Structuring" isn't, however, very easy to prove. So CAFRA allows the Government to use civil proceedings, which have a lower burden of proof than criminal ones, against suspected lawbreakers, including tax evaders. Although CAFRA tightened the original statute, adding a modicum of protection for those on the wrong end of this law, such as time limits and the need for a seizure warrant from a District Court (although the accused doesn't have to be involved in this procedure), the bottom line is that it assumes guilt over innocence, and is an easy way for the IRS to take what it thinks it is owed without needing to follow pesky due process. Unsurprisingly, the route one must follow to claim one's property back in the event that the Government makes a mistake is costly and time-consuming, and not many people bother. Which is probably why net asset forfeitures jumped from USD1.7bn to USD4.2bn between end-September 2011 and the same date in 2012. I wonder what Rousseau would make of all this? Time, perhaps, to begin redrawing the Social Contract.
    Source: www.tax-news.com/news/Concern_At_IRS_Use_of_Civil_Asset_Forfeiture_Laws_____66261.html

  • Aug 21, 2014   United States: election fever

    It's something of an exaggeration to say that the United States Congress is totally paralyzed. Yes, the ideological chasm between a left-wing Government and a right-wing Republican Party holding sway in the House of Representatives is wide. Yet since the commencement of the 113th Congress on January 5, 2013 – perhaps the most divided Congress in modern history – 146 laws have been enacted and the current session isn't due to end until January 3, 2015. Yes, this figure is substantially lower than the 283 laws enacted in the 112th Congress and the 383 enacted in the 111th. But it shows that Congress isn't completely gridlocked. The difference between the current session and the previous two is that the amount of tax legislation passed over the last 18 months has been virtually nil, (scouring the list of statutes, I found four: the Fallen Firefighters Tax Clarification Act; an amendment to include vaccines against seasonal influenza within the definition of taxable vaccines; tax benefits for charitable cash contributions for the relief of victims of the Typhoon Haiyan in the Philippines; and a law which eliminates taxpayer financing of presidential campaigns and party conventions). Don't get me wrong here; there's no point in passing laws for the sake of it, and sometimes, in the interests of stability, less is more. But Congress has maybe passed laws when it hasn't really needed to, and hasn't when it really has needed to: the 50 or so tax provisions known as the "tax extenders" which expired at the end of last year being the most obvious example. Among these extenders is the R&D tax credit, which has been renewed more than 20 times since its inception around 30 years ago. With probably billions of dollars of investment in research riding on such things, it's no way to run a tax code! The protagonists in Congress have their reasons for holding their ground so doggedly, but it isn't doing America's reputation or competitiveness much good. The USA is now paying the price for effectively refusing to join the corporate tax cut race. It hasn't quite been the "race to the bottom" that some Democrats had feared, but it is cold hard fact, and often repeated, that the US, with its 35 percent statutory corporate tax, plus state tax, is way behind the competition – the average rate in OECD countries is in the mid-20s and falling. So the current clamor for US pharmaceutical firms to "invert" by acquiring rivals in lower-taxed jurisdictions is in a way quite understandable. But in spite of a Congress constipated on tax issues, is there really a need for President Obama to bypass the legislature to deter US corporations from inverting? It sets a dangerous precedent in a country that is rightly proud of its democratic traditions. The President does have some form though; the growing network of intergovernmental agreements was never mentioned in FATCA, and neither was reciprocity of information exchange. However, elections do funny things to politicians, and the current clamor for changes to the inversion rules has more to do with winning votes in the upcoming midterms than anything else. Corporate tax reform isn't exactly going to be a winning ticket, even though it could benefit the US economy in the long-run. Hammering companies which "game the system" as the President puts it, while "shipping jobs overseas" probably will.
    Source: www.tax-news.com/news/Obama_Confirms_Search_For_Inversion_Solutions____65495.html

  • Jul 24, 2014   United States: FATCA'd

    Something has gone very wrong somewhere when an American passport, historically that most prized of possessions, is considered a curse rather than a blessing. But the statistics don't lie: the Treasury Department's own figures show just over 1,000 people handed back their passports or their green cards in the first quarter of 2014, an increase of almost 50 percent compared with Q1 2013. And this is no freak either, because these numbers have been steadily rising for the past two or three years. What these raw figures don't tell us is why people are turning their backs on America in increasing numbers, and there could be any number of reasons, political or practical. However, let's face it, most of us are thinking it: tax is the reason. But more specifically FATCA, which went into full force (almost) on July 1. A survey by the De Vere Group would seem to verify anecdotal evidence that FATCA is behind the jump in the number of Americans renouncing their citizenship. When set against a US expat population of around 6.3m, and an overall US population of almost 320m, the numbers taking foreign citizenship are small however, and the majority of Americans might wish them good riddance anyway if they are so determined to avoid their tax obligations that they would rather become a Costa Rican, a Panamanian or a Singaporean. Perhaps attitudes might be a little different if there was more widespread awareness of FATCA, "the worst law that most Americans have never heard of" as that anti-FATCA campaign group calls it. Still, only a small fraction is going to be affected by it, so why should they care? Which is presumably one of the reasons why FATCA sneaked in under the radar in the first place.
    Source: www.tax-news.com/news/FATCA_More_US_Expats_Consider_Handing_In_Passports____65277.html

  • Jun 02, 2014   United States: long-running craziness

    I don't apologize for returning to the long-running craziness of anti-dumping duties, which can have no result but to hurt consumers. This week, it is serial offender the US Department of Commerce that is in the spotlight over specialty steels. There are a lot of numbers and a lot of countries involved, but we'll just focus on one pair: the DoC is proposing an anti-dumping duty of 407 percent (no, there are no decimal points missing, it's four hundred plus percent) on non-oriented electrical steel (NOES), whatever that might be, from China. And in case you think this is just an anti-Chinese rant, there is a 200 percent duty on Swedish companies, for good measure. To be clear, that means that if a Chinese company sells NOES to a Chicago manufacturer for USD2,000 a tonne, it will actually cost the US importer more than USD10,000 a tonne, which is the "fair" price according to the DoC. Leaving aside the fact that the WTO provides ample means for the US to counter such unfair behavior, if it exists, I want to ask you a simple question: what Chinese company in its senses would want to sell NOES to a US competitor at less than a quarter of its real production cost? And before you say that the Chinese Government is setting out to ruin US producers of NOES (roughly speaking the DoC's argument), you need to be prepared to believe the same about the Swedish Government. It doesn't take a mastermind to work out that this is simply a protectionist ploy on the part of US NOES producers whose antiquated production methods (and in all probability whose unionist workers) render them hopelessly uncompetitive in world markets. This is not new behaviour on the part of the DoC, by the way; it has been singing the anti-dumping song for decades. And it is by no means only a US technique: the EU is just as bad. Ask the French! The solution to the problem is to move the authorization of anti-dumping duties (and their equally nasty cousin, countervailing duties) away from nation states and into an international body which would be able to resist producer capture. It's very hard to understand why this hasn't already happened at the WTO. Oh, OK, it's not hard to understand. Sigh!
    Source: http://www.tax-news.com/news/US_Planning_Several_AntiDumping_Duties_On_Steel____64812.html

  • May 15, 2014   United States: in an information free-for-all

    I'm not so sure though about the Senate Republicans' continued refusal to pass trade treaties which have been becalmed in Congress for years because of fears over the forced disclosure of private bank account information. This type of wrecking behaviour is a strong argument for the Trade Promotion Authority, which would prevent the Senate from holding tax treaties hostage to partisan goals, or at least force it into striking down treaties which have been meticulously negotiated with friendly countries and which would greatly benefit the US economy, something it would presumably hesitate to do. Led by Senator Rand Paul (R – Kentucky), the anti-treaty rhetoric seemingly conflates the usual tax treaty exchange of information wording, which has to some extent been expanded in newer treaties, with the out-and-out thoroughgoing nastiness of FATCA. But they are two separate things: the IGAs being reached between the Treasury and foreign countries are arguably unconstitutional, while the current crop of tax treaties are hardly more objectionable than dozens of previous ones. Or are they? The Treasury intones: "one of the critical principles under today's existing international standards for information exchange upon request is that the country receiving information must ensure that exchanged information is kept confidential and only used for legitimate tax administration purposes." In the age of Edward Snowden and the NSA this is a laughable proposition, but at least under traditional tax treaties there are limits to the type and amount of information that is to be exchanged, and the channels for exchange are narrowly defined; that is not so under FATCA, which sweeps up overtly innocent along with potentially deceptive behaviour. Much as we would like to see FATCA squashed, the attempt to do it via the sequestration of innocent tax treaties is inappropriate, and will not even be successful.
    Source: www.tax-news.com/news/Continued_Block_On_US_Tax_Treaty_Approvals____64638.html

  • May 08, 2014   United States: making sense of FATCA

    Well, after that rant, I'm allowed to be a little bit facetious, and I'll do it by imagining that the USA is going to change from using FATCA to enforce tax transparency to employing it as a way of punishing regimes that it doesn't like, starting of course with Russia, simply by refusing to agree to enter model IGAs with them. The result will be to garner 30 percent of US-source payments to FFIs in such countries, although you have to set those receipts against the tax which the IRS would have harvested in any case on the legitimately-declared income of overseas Americans. But is there such a thing? Some of them have already turned in their passports, others have migrated their bank accounts to places where the IRS can't find them; and even those who are submitting to the FATCA rules of IGA countries are presumably hard at work minimizing the balances and income flows that could get trapped under FATCA. So it's really easier for the IRS not to bother (try finding an IRS statement in favor of FATCA, which it must hate); the more countries applying undiluted FATCA, the better. So, Russia may be the first, but watch out for more to come. You read it here first.
    Source: www.tax-news.com/news/US_May_Close_Door_On_Russian_FATCA_IGA_Talks____64551.html

  • May 01, 2014   United States: generous to a T

    The IRS, which like most tax authorities is subject to a regime of democratic accountability only indirectly, has not had a good week, after it was accused by the Treasury Inspector General for Tax Administration of paying bonuses to tax-deliquent employees, and told by the United States Government Accountability Office that it needs to sharpen up still further even after having had to deal with a series of past budget cuts. The GAO also criticized the IRS for failing to audit a sufficient number of large partnerships, a relatively new phenomenon in the investment sphere. Nobody much loves tax collectors, but you have to have a degree of sympathy with the IRS, which has become a victim of internecine political rivalry on the Hill, as sequestration and a series of unimplemented budgets have left it with yesterday's level of resources to cope with today's level of demands. Obamacare, right or wrong as a policy initiative, and who would be brave enough to say, may be the straw that breaks the camel's back. Mind you, the IRS is in clover compared to the tax collection authority in Europe's proto-state, the European Union, which has no direct power to collect tax, and has to rely on percentage scrapings from Value Added Tax receipts and customs duties, for which it is beholden to national administrations, in addition to direct payments from member states based on a proportion of national income. Needless to say, national governments jealously guard their own income flows, and have always tried to prevent the Brussels bureaucracy from gaining any direct control over taxation. As part of its ambitions towards statehood for the EU, the European Parliament would of course like to change this system towards one in which the Union has direct tax-collecting power, and this week it was busy forwarding such an agenda, as it rolls towards the end of its term. For a while the Financial Transactions Tax was the great white hope of the EU's tax centralizers, although they were deluding themselves if they believed that the countries collecting such a tax would willingly pass any of it over to the centre. Now that the FTT itself is under a cloud, they are left without any clear road forward. Hence the Parliament's futile, last ditch attempt to lay down a marker for the future.
    Source: www.tax-news.com/news/IRS_Gives_Bonuses_To_TaxDelinquent_Employees____64491.html

  • Apr 24, 2014   United States: getting taxier

    By comparison with most European countries, the USA has relatively low taxation, but it is going up. That OECD report (the organization does have some uses!) says that the average worker in the United States faced a tax burden on labour income (tax wedge) of 31.3 percent in 2013 compared with the OECD average of 35.9 percent; but it had risen by nearly 1 percentage point since 2000. American workers should probably be thankful that Congress is paralyzed: according to a report from Americans for Tax Reform, President Obama has proposed 442 tax hikes between 2010 and 2014, but most of those will be in his annual budgets, quite repetitive year on year, and rejected every year by the Republican House. That doesn't include the Obamacare taxes which are gradually going into effect. Statistics are not much use in understanding what is happening to the tax structure in the USA: although individual tax revenues have increased steadily over the years, while corporate tax revenues have declined by comparison, that is probably mostly due to the shift by smaller businesses to "pass-through" structures which evidently has the effect of transferring tax revenues from the corporate sector to the individual sector. What is clear, though, is that the complexity of the tax system is ballooning out of control: a report this week from the National Taxpayers Union has some scary numbers about the size of the Tax Code and the taxpayers' time it soaks up. Congress is not short of recipes for reform – showers of hearings and well-intentioned bills regularly descend upon the heads of legislators. This week's crop includes a bill to extend small business expensing tax breaks permanently. It is an attempt to get around the log-jam of "tax extenders" legislation which is threatening to run into the buffers when sittings are suspended for the November mid-term elections, probably at the beginning of October. All of this activity is presumably futile, and its purpose? Electoral propaganda, mostly, I suppose. Despite inaction from the Congress (or perhaps because of it) total government spending is more or less static at 37 percent of GDP, a low figure by international comparison, while tax revenues are booming and the deficit this year will probably be only about 4 percent of GDP. Weirdly, therefore, there is less and less case for reform. Roll on November!
    Source: www.tax-news.com/news/Obama_Has_Proposed_442_Tax_Hikes_ATR_Calculates____64389.html

  • Apr 03, 2014   United States: more against trade than for it

    When we come to the US, the situation becomes much more complicated. Congress is sovereign, of course, but by tradition the President has the conduct of international trade affairs (subject to ratification by Congress, at least as regards international treaties). Over time, the Administration has acquired what appear to be some quite direct powers over trade matters, including the ability to implement "dumping" and "countervailing" duties against imports that allegedly breach WTO guidelines. These are implemented, under the President's authority, of course, via the United States International Trade Commission (USITC) and the Commerce Department. As a very broad generalization, the USITC has attempted to follow an internationalist path, although obviously much depends on the nature of its head, the USIT Representative (USITR); and there have been some very good ones. But nothing nice can be said about the Commerce Department, which was comprehensively captured by industry (and the Unions) long ago, and operates 100 percent as a protectionist force against free trade. Right-wing presidents have tried to counter the baneful influence of Commerce by appointing free-traders to the USITC, but when President Obama came to power, he was largely anti-trade, and initially failed to understand the need to support the USITC or to take a pro-trade stance with the Congress. Although, and to his credit, he is now a reformed character as regards trade, and may even have moments at which he half-believes in free trade, the country is now reaping the harvest of his initial scepticism, through a series of disastrous WTO encounters with China and other nations which have left the USA on the wrong side of trade history. The President hopes that the prospective overarching EU trade deal (the TTIP) and the Asia Pacific equivalent (the TPP) will redeem his trade reputation and force the US back into the center of world trading advancement; but his continuing lack of success in managing the Congress successfully makes this a vain hope. He is not going to get the TPA (Trade Promotion Authority) which he would need even in order to present such deals to Congress; and without it neither the TTIP nor the TPP stands a cat's chance in Hell of passing Congress before the mid-terms. After that, who knows? Looking forward, the picture is of course complex. If there is a bi-cameral Republican Congress after the mid-terms, then there is hope for the TTIP and the TPP (as long as Japan is excluded from the process); otherwise, forget it. On balance, and even if Hilary wins the presidency in 2016, US trade policy is likely to swing back to a more internationalist stance, while EU trade policy is likely to go into reverse, due to the gradually increasing powers of the deadly Parliament, which is institutionally anti-business and anti-trade, and the abject failure of the EU to tackle its long-term economic problems of excessive debt and domination by the "social partners" heresy. David Cameron's valiant attempts to reform the EU are of course futile and irrelevant. Whatever the future for the UK, he cannot stand in the way of history. 500 years of authoritarian bloodshed still cast a shadow into the future, and their republican consequences have yet to be fully worked out.
    Source: www.usa-tax-news.com/story/China_Opposes_US_Solar_Reinvestigation_____63753.html

  • Mar 06, 2014   United States: unreformed

    Surely I can't end today without mentioning Dave Camp's tax reform draft, which will presumably go the way of his colleague Max Baucus's equivalent drafts. That two such intricately crafted prescriptions for a future US tax system will fall victim to bi-partisan politics may seem an indictment of democracy as she is practised nowadays, and indeed the Economist asks this week whether democracy is failing us. Of course it concludes, as did Winston Churchill, that democracy is a bad system – but that all the others are worse. Democracy suffers from its reliance on the level of education of voters, which is still far below what it would be in an ideal world. But ask this question: are the bulk of voters better or less informed today than they were a hundred years ago? The fact that they are now incomparably better informed accounts for the fact that they despise politics and politicians, which are cast in an 18th or 19th century mould. It's not democracy that needs to change, it's politics. The broken state of the Congress may be a reflection of the ossification of the American party system, or it may even be healthy: countries seldom suffer from a lack of legislation; usually it's the opposite, that is they suffer from an excess of it. And as an example, notice that many of the problems that preoccupy today's legislators, from Dodd-Frank to Obamacare, result from a period of one-party dominance. If the Republicans win the Senate this fall, only the President, for all his faults, will stand in the way of another wave of ill-considered legislation.
    Source: www.tax-news.com/news/Camp_Issues_US_Tax_Reform_Discussion_Draft____63869.html

  • Feb 27, 2014   United States: wellness denied

    The law of unintended consequences merely states the obvious: that people often fail to understand the results of their actions. You intend one thing, and you get something else; and no recent piece of legislation has demonstrated this more thoroughly than Obamacare. It's a perfect example of what happens if you design a complex system from first principles without testing and challenging your ideas in the real world. Obviously that's exemplified in the chaotic implementation of the new rules. I suppose, sitting in the Oval Office, driven by principle (correct or otherwise), and surrounded by sycophants, it's easy to believe in the essential rightness of what you are doing, while neglecting to take account of the realities of human nature and the market. Of course all American citizens should have affordable health-care. Who could disagree? And of course the substantial extra costs of extending health-care nation-wide will have to be paid for. Although the experience of other countries shows that there is no easy financing model. Well, it ain't so simple, as the administration is discovering to its immense frustration. The latest road-blocks are the discoveries that taxing medical device companies results in less innovation, not more (could have told you that), and that forcing companies to pay for health-care for full-time employees results in fewer of them (could have told you that one, as well, but I wasn't asked). There's an outside chance that the catastrophic meltdown of Obamacare will result in a Republican bi-cameral majority this fall, with a consequent rapid dismantling of Obamacare, but if that doesn't happen, let's hope that there is not too much damage to Uncle Sam's health and welfare from the Administration's inept social engineering.
    Source: www.tax-news.com/news/US_Medical_Device_Makers_Condemn_New_Tax____63793.html

  • Jan 02, 2014   United States: the State above all States

    Regrettably, here is a quote from one of our current news stories: The IRS is finalizing IDES to allow for FFIs and HCTAs to exchange FATCA data automatically with the US. Now, apart from the awful string of acronyms, for which I can only apologize, this is a perfect example of the use of technology to tighten the knot that is binding us ever more tightly to the State. No individual has any freedom whatsoever within this cat's cradle of connections. What remains is to give in, cheat or leave, which latter in the case of American citizens means to give up citizenship. Again, I must emphasize that not paying taxes is wrong. But not so wrong as the Government that extracts them in defiance of liberty. What is especially remarkable about FATCA, though, is that no-one, not even the Treasury, pretends that it will make money. Every estimate of the costs that I have seen, and that is just the external costs, tops USD5bn, and many stretch out to more than USD10bn, whereas the Treasury itself reckons to extract no more than USD1bn in extra tax. It is, pure and simple, an exercise in repression, based on a presumption of guilt. So shame on them for that.
    Source: www.tax-news.com/news/IRS_Finalizes_Intergovernmental_FATCA_Data_Exchange_Format____63149.html

  • Dec 30, 2013   United States: to hammer energy users

    It's Christmas week, isn't it, so obviously lots of governments will be making goodwill gestures to their stressed-out, over-taxed citizens, to show how grateful they are for the tax money that pays for their big, black cars, the trips to G3, G5, G8, G20, G30 junkets in beautiful places with long-legged personal assistants and the rest. Well, let's see: Mexico is increasing the scope of VAT and has gone back on some promised tax reductions; Max Baucus wants to reduce energy tax incentives (increase taxes, in other words and am I seeing things, or does he have a double who's going to be the Ambassador to China – that definitely proves that the President has gone off the TPP); community taxes are increasing right across Belgium; and France (that traditional home of Christmas bonhomie) is going to scale back the increases it is planning to the electricity contribution (but not for households), after the politician piloting the latest Finance Bill through parliament admitted that the rises were "brutal." So, a savage sovereign Bah, Humbug is what we're going to get. Well, politicians know all about humbug, I suppose.
    Source: http://www.tax-news.com/news/Baucus_Presents_US_Energy_Tax_Reform_Proposals____63097.html

  • Dec 19, 2013   United States: less disunited

    In an unexpected and very welcome outbreak of sanity, Congressional negotiators in the US have come up with a budget, which passed easily through the House, and looks to have a good chance of being accepted by the Senate. President Obama has already said that he will sign a budget bill if one reaches him. If there is a budget, it will be the first one for five years. It's no great shakes: it foresees spending of USD43bn above the Republicans' own budget total, albeit USD50bn below what the Democrats had originally proposed. Some of the more damaging parts of the "sequester" spending cuts have been replaced by minor funding initiatives, but for the most part it's "steady as she goes." There is nothing in the budget to address the debt ceiling problem, which means that another confrontation is probable in January or February, and no action has been taken on the "tax extenders." If those were included, without additional funding sources, they would take the total up by about that selfsame USD50bn to USD1.06 trillion and the Center on Budget and Policy Priorities says that this would push up the nation's debt to 99 percent of GDP by 2040. Spending is still out of control, right-wing Republicans would say; but John Boehner seems to have been able to head them off. The tax extenders are the big issue: most of them exist in order to moderate the deleterious effects of the dysfunctional US tax system on the economy, so abandoning them will have a seriously bad result for business. Yet the country suddenly seems unable to pay for them – why? Because entitlement spending is roaring away unchecked, and it is apparently impossible for anything to be done about it with a left-wing White House and Senate. So it's only half a cheer for the budget. It's evidence that bipartisanship is not quite dead; now aisle-crossing needs to accelerate, to give the country what it needs: a new tax system. There's no time to lose.
    Source: www.tax-news.com/news/CBPP_US_Tax_Extenders_Extension_Should_Be_Funded____63008.html

  • Nov 28, 2013   United States: means well

    At Thanksgiving, plaudits also for US Senate Finance Committee Chairman Max Baucus (D - Montana) who has released a discussion draft setting out options for international tax reform, although he received only grudging praise from his "partner" on the tax reform trail, Dave Camp, (R - Michigan) Chairman of the House Ways and Means Committee. To many commentators it seemed unhelpful that Baucus has released his ideas while the parties are struggling towards an agreement over the budget, plus another fiscal cliff is looming. It's not Baucus's fault however that his draft saw the light of day at the very moment that Democrats in the Senate used the "nuclear option" of denying Republicans the use of the filibuster to contest the President's legal appointments; but if anything was needed to harden Republican attitudes, surely that will have done the trick. Even without the unfortunate timing, the contents of Baucus's draft awoke immediate opposition from business, which sees his ideas as reducing, not enhancing the competitiveness of US international companies. All in all, the draft seems like the deadest of dead ducks. A turkey, in other words.
    Source: www.tax-news.com/news/Baucus_Issues_Contentious_US_International_Tax_Reform_Draft____62780.html

  • Nov 21, 2013   United States: talking

    Let's hope that this week's talks between Antigua and Barbuda (David) and the USA (Goliath) represent an outbreak of sanity in one of the silliest and least constructive episodes in recent international relations. I'm offering bouquets on a provisional basis, because it could all still go wrong. So far the progress of the affair has not reflected credit on anyone, except possibly the WTO, which has tried to walk a tightrope between on the one hand infuriating the US, and on the other failing to support a member country which on the face of it has been damaged. I'm not going to try to allocate blame for the original blow-up: it was probably foolish and short-sighted of Antigua to help itself with such insouicance at the free-lunch counter of offshore gaming; but the US, while justified from any legal perspective in its original actions against the operators of Antiguan sites, has seemed unwilling to compromise in subsequent negotiations. The strict US laws against inter-state and international gaming, whatever their original justification in a pre-Internet age, hardly seem fit for purpose in a wired-up, interconnected world, and indeed they are gradually being bypassed, at least for domestic operators, by more modern legislation both at state and federal level. It's time to let down the barriers internationally; and if it's done in a sensible way, the result could be a win-win situation for all concerned: American consumers, the US Treasury and the Davids of The Caribbean.
    Source: www.lowtax.net/news/Antigua-US-Hold-Talks-On-Gaming-Dispute-62707.html

  • Oct 24, 2013   United States: in stasis

    What to say about the failure of the US Congress to reach a substantive agreement on tax and spending reform last week? Of course it's a failure of the political establishment in general, rather than of the Congress in particular. Acres of verbiage have been devoted to analyses of the relative contributions of all the leading players, from the President downwards, the need to change the Constitution, the gerrymandering that has reduced the effectiveness of the electoral mechanism in both houses, but particularly in the House of Representatives, etcetera, etcetera and so forth. So we won't go there. Still, from the perspective of business, the whole thing is a disaster: as a destination for investment, the USA is already uncompetitive, and the prospect of endless logjam which now stretches out certainly until January and probably much further will do nothing to help. Businesses usually have stability at the top of their wish-lists, so as to be able to plan their investments, and I suppose you could say that they have got it, since nothing is going to change in the foreseeable future. But that means continuing lack of competitivity, continuing leakage of US corporate profits and capital to lower-tax foreign destinations, and continuing preference for other markets on the part of foreign manufacturers and investors. All of that is bad for American jobs. Don't be fooled by the ebullient stock market: companies like Apple and Google may have their capital base in the US, but they are rewarding stockholders with profits made abroad, not in the US. Apple is a perfect example, indeed, turning corporate somersaults in order to repatriate enough of its foreign earnings to be able to pay dividends without incurring horrendous tax charges in the US. I don't have a panacea for America's ills – there is not much point in hoping for a bi-cameral right-wing legislature after the damage the Republicans have done themselves with their antics, and the now-more-probable bi-cameral left-wing legislature will bring on another onslaught of anti-business legislation. The future looks bleak.
    Source: www.lowtax.net/asp/story/front/Kicking_The_Can_Down_The_Road____62394.html

  • Sep 12, 2013   United States: on the wrong side

    Speaking of Russia, and indeed the US and the UK, these were the ringleaders of the G20's attack in St Petersburg last week on tax avoidance, by making automatic exchange of tax information the global standard, and agreeing to steps for cracking down on base erosion and profit shifting (BEPS). Vladimir Putin said that they planned to adopt a joint Action Plan for the prevention of BEPS; and the end-of-meeting declaration said that the G20 has been in talks with the OECD to create a single global standard for the automatic exchange of information. Now it's very easy for international political leaders to climb onto the morality bandwaggon and pontificate about how awful it is that individuals and companies evade tax, but to me the whole world has gone topsy-turvy. The present parlous state of the global economy and threadbare national treasuries is directly and unequivocally the fault of political leaders who have luxuriated in debt and spending over the last 20 years. Taxes and debt are both the highest they have ever been in almost all of the G20 countries, except in some places which are lucky enough to have plenty of black gold (Russia being one of them, actually). But instead of turning their efforts to cutting back on wasteful spending, which is of course politically very unpopular, these spendthrift politicians send up a barrage of criticism directed at "tax havens," which they would of course like to exterminate, and at companies which can't defend themselves and don't have votes. "In light of ongoing budget consolidation, the budget revenue base should be expanded. It causes widespread anger when companies operate in one country, pay taxes in the other, and take profit out of the countries where they operate and render services," says Russian Finance Minister Anton Siluanov, while Vladimir Putin says that the implementation of the G20's Plan should result in "a significant reduction in the practice of channeling profits into offshore accounts and an increase in tax payment in the jurisdiction where a given product or service is produced." In other words, increase already high levels of tax. That's all they seem to be able to think of. Why can't people see that it's the politicians who are the problem? Rhetorical question, of course; and the media are largely to blame for permitting and even encouraging the game to be played. So the grandstanding and the waste will continue, and a whole generation of young people in Europe face a bleak future. NEETs, they are called: Not in Employment, Education or Training. On a long-term view, what is happening is a shift of economic power from over-taxed and over-governed "old" countries to economically younger parts of the world, although that's no comfort to the NEETs.
    Source: www.lowtax.net/asp/story/front/G20_Forging_Ahead_With_AntiAvoidance_Action____61970.html

  • Aug 08, 2013   United States: in stasis

    Skipping from one socialist administration to another, it is frankly depressing to read President Obama's latest tax reform proposals, which seem to take no account of the bi-partisan work that has been done in Congress over recent months. The intended tax rate of 28 percent is not "globally competitive" as he claims; you have to add an average state tax rate of 5 percent, taking it to 33 percent in total, which is equal to the highest rate in the EU, and a full 10 percentage points above the current world average. Then, the idea of a minimum tax on foreign earnings would be a disaster, throttling overseas investment, which is one of the few bright spots in US corporate performance, and driving companies into ever more arcane global structures, which is precisely the opposite of what is wanted by the G20. But the worst part of the proposals is that, while the headline corporate tax reform would be roughly revenue-neutral, there would be additional revenue from the taxation of foreign earnings. A tax hike, therefore. Not that there are any numbers, and by jumping back so far from the sorts of detailed proposal being made in Congress, the President has shown that he doesn't believe in tax reform, period. This is another piece of electioneering, and just like his Australian peers, Obama must be thinking that he is going to lose (meaning, control of the Senate in the mid-terms). So the poor old US is set for another three years of inaction, blighted by its rusty old tax system. Not fit for purpose.
    Source: www.lowtax.net/asp/story/front/Obama_Equates_Corporate_Tax_Rate_Cut_With_Increased_Spending____61585.html

  • Aug 01, 2013   United States: trading first

    It's all happening in trade at the moment with the United States gaining its second star in a week after reporting good progress with the Trans-Pacific Partnership neogtiations, after a successful opening to the US/EU TTIP talks last week. Japan has now officially joined the process, which also includes Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. All eyes are now on Shinzo Abe, Japanese Prime Minister, who has to deliver domestically contentious cuts to agricultural tariffs if Japan is to fulfil its side of the trade bargain. Step one has been achieved with last week's elections which gave him control of both houses of parliament, but there is a long way to go, and he has to avoid the temptations of constitutional tinkering in preference to the grittier tariff reform process.
    Source: www.lowtax.net/asp/story/front/US_Reports_Further_Strong_Progress_In_TPP_Talks____61538.html

  • Jul 25, 2013   United States: all sweetness and light

    So my bouquets this week will have to go to the UE and the US for managing to have a first TTIP negotiation without the French walking out sulkily over their "exception culturelle," or the US motor industry attacking State Aid for Renault, Fiat or Volkswagen. Pascal Lamy, about to leave the WTO after two terms as Director-General, reflected a little sourly over the number of bilateral or trilateral or quadrilateral trade deals taking place while the Doha Round continues to shuffle sideways. Nobody but nobody has done more for world trade in the last ten years, so you can empathize with him without necessarily agreeing. People talk about the WTO having been diminished by the "failure" of the Doha Round, but I don't see it that way. Various countries have been accused of standing in the way of a Doha accord, but more likely it isn't the fault of any one country or group of countries; probably the Round was too ambitious in the first place. What the seemingly endless negotiations will have achieved is to show individual groupings what is in fact possible, and they have gone off and done it through the plethora of FTAs that have been and are being signed. These in turn act as a spur to competition for trading partners that get left out, and by now there is a dizzying array of FTAs of all shapes and sizes. Quite often these separate agreements do make use of WTO dispute resolution procedures and treaty fine print, so that all the time, the sum total of unresolved trading territory becomes smaller and smaller. The gap between what exists and what the framers of Doha originally wanted is now far smaller than it was ten years ago, and it becomes correspondingly more likely that Doha will, in time, come into being.
    Source: www.lowtax.net/asp/story/front/EU_US_Complete_First_Round_Of_TTIP_Talks____61422.html

  • Jun 13, 2013   United States: onward and upward

    It's not fair, is it, at least not judged from the perspective of say a jobless Greek or Italian home owner, that the United States real estate market seems to be back in rude health less than five years after mortgage-linked CDOs nearly brought the global house of financial cards crashing to the ground. Yet the picture in the US looks more positive than it has done than at any time in the last five or six years: metropolitan area median home prices continued to rise in the first quarter of 2013, with the national gain showing the best year-over-year performance in over seven years, according to the latest quarterly report by the National Association of Realtors. The median existing single-family home price rose in 133 out of 150 metropolitan statistical areas (MSAs) based on closings in the first quarter of 2013 compared with first quarter last year, while 17 areas had price declines. At the end of the first quarter there were 1.93 million existing homes available for sale, which is 16.8 percent below the close of the first quarter of 2012, when 2.32 million homes were on the market. In the fourth quarter of 2012 the median price rose 10.0 percent from a year earlier. In March 2013, the Bank of America revised upwards its house price forecast for 2013 from 4.7 percent growth to 8 percent growth. At around the same time, JP Morgan doubled its prediction for house price growth to 7 percent, and it anticipates 14 percent growth by the end of 2015. It remains to be seen though whether reality meets the banks' expectations. The only thing that might dent the animal spirits that are propelling the market upwards would be if the mortgage interest deduction was to be removed; but according to a new study from the Urban-Brookings Tax Policy Center, there is no chance at all of that happening.
    Source: www.lowtax.net/asp/story/front/Study_Analyzes_Effect_Of_US_Tax_Reforms_On_Housing_Prices_____61003.html

  • May 30, 2013   United States: helps favors investors

    Amid complaints from businesses in particular about the horrors of the US Tax Code, and in an interval between the ongoing shenanigans on the Hill over attempts to change things, it is pleasant to be able to report that US investors have the world's best investment regime in terms of transparency, fees and choice; and this despite the fact that the US scores low on the taxation front, with higher taxes on savings and investment than most other countries. Perhaps I shouldn't be including investment in a business friendliness review; but people start businesses in order to make money, and if they weren't successful they'd stop and get a job, so it's important that they are able to put their money somewhere it will be safe and productive.
    Source: www.lowtax.net/asp/story/front/US_Again_Leads_Global_Fund_Investor_Experience_Ranking____60819.html

  • May 16, 2013   United States: goes at tax reform

    Just possibly the US Congress is getting serious about tax reform, with the launch of a bi-partisan consultation site showing that the two parties actually plan to create a model for a simplified tax code based on what taxpayers themselves say they want. If it's to work, the two sides will have to ditch their existing, entrenched positions, and concentrate just on simplicity. It won't be a question of increasing or reducing taxation; it will be a question of rearranging it, possibly changing the balance between individual and corporate taxes, possibly getting rid of the AMT, possibly reducing capital taxes. And what of the President? People are quick to say that he has not succeeded in "managing" the Congress; now it will be a question of Congress managing him, because any straightened-out tax system is going to cross some of his red lines, running up against his principles. You see how difficult it all seems: Messrs Camp and Baucus make a comparison with 1985, the last time that there was a serious attempt at major tax reform. But in 1985 Ronald Reagan was President, the Democrats had the House, and the Republicans had the Senate. I'm not sure if at the time that constellation seemed favorable towards a bi-partisan reform, but today's constellation seems decidedly unfavorable. I hope to be wrong.
    Source: www.lowtax.net/asp/story/front/Lawmakers_Launch_US_Tax_Reform_Website____60718.html

  • Apr 18, 2013   United States: mistreat China

    One country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.
    Source: www.lowtax.net/asp/story/front/China_Sees_Itself_Subject_To_Increasing_Trade_Friction____60398.html

  • Apr 18, 2013   United States: get trade medals

    The Trans-Pacific Partnership (TPP) had a good week, with Mexico agreeing to allow Japan into the negotiations, and the US administration reaching an agreement over automobile tariffs with Japan, albeit accompanied by howls of anguish from Detroit, and ritual protestations from the usual suspects among protectionist politicians. This will clear the way for the President to give Congress 90 days' notice of his intention to begin actual TPP negotiations. It's thought that this step may happen towards the end of the month when some other existing members overcome their reservations about the inclusion of Japan. All twelve actual and prospective members of the TPP are also members of APEC, and there is an APEC meeting in Indonesia next week, which would be an opportunity for remaining issues to be ironed out, meaning presumably that Japan will have to make the right noises about opening up its agricultural sector to Australia and New Zealand. That is immediately followed by a Canada/Japan meeting in Ottawa, which may provide the final trigger for the US to go ahead.
    Source: www.lowtax.net/asp/story/front/Mexico_Backs_Japans_Bid_To_Join_TPP_Talks_____60416.html

  • Apr 11, 2013   United States: pays more tax

    It's not clear whether this week's poor labor statistics in the USA are due in some measure to the "fiscal cliff" deal, although it's hard not to imagine that the 2% pay loss through the payroll tax hike has had its effect. That's a direct hit on the pockets of virtually every working American. But the "fiscal cliff" deal surely is implicated in the 5-day slippage of "Tax Freedom Day." On the margin, which is where new jobs are created, it's a mathematical certainty that higher tax means fewer jobs and fewer entrepreneurs choosing to start up a business. There is no clear evidence that the sequester is having a major impact on the jobs market, although it will have a beneficial effect on the deficit. More important than both these factors, though, is the failure of the Congress, and, I suppose, of the President, to do anything about the corporate tax regime. Trillions of dollars are lying uselessly offshore or are being employed overseas to generate yet more unrepatriatable cash, and again, on the margin, the domestic tax regime dissuades American companies from investing at home. Solutions to the problem are two-a-penny: every Representative and every Senator knows what needs to be done. Please, for the country's sake, get on with it and do it! The President's proposed change to the foreign pension fund investment tax regime seems, on the other hand, to be quite sensible. Let's hope it doesn't get bogged down in the inevitable summer budgetary follies.
    Source: www.lowtax.net/asp/story/front/Tax_Freedom_Day_Is_Again_Later_For_US_Taxpayers____60346.html

  • Feb 21, 2013   United States: has good intentions

    The EU/US FTA completes a trio of trade-related stories this week, not that I believe it will happen. There are too many special interests on both sides of the pond: the US President no longer has power to adopt trade treaties under the TPA (Trade Promotion Authority), unfortunately, so that any treaty is likely to be torn to shreds by the Congress, while in Europe it's just about unimaginable that the French will ever agree to dismantling the Common Agricultural Policy, which stands squarely in the way of open markets. And after that there is the European Parliament, which is just about to demonstrate its wilful, childish, destructive nature by voting against the budget laboriously hacked out by the 27 leaders last week. So the bouquet I am giving to the US is to reward good intentions rather than actual results. If the FTA comes into being, there will be a florist's shop bigger than the Capitol.
    Source: http://www.lowtax.net/asp/story/front/Negotiations_To_Begin_On_USEU_FTA____59718.html

  • Jan 31, 2013   United States: an outbreak of rationality

    Europe's systemic lack of competitive advantage is revealing itself, day-by-day, in its terrible and worsening unemployment figures, while the US demonstrates some underlying resilience during difficult times. There may even be an outbreak of bipartisanship in the Congress, with the passage by the House and its rapid acceptance by the Senate and the President of a temporizing bill to push off the next section of the fiscal cliff. It is tempting to equate the relative health of the US economy to its lower level of public spending and taxation; but this may be an illusory equation. It is horribly difficult to compare such figures across borders. Apparently, US public spending is about 5% less than the UK's and 10% less than higher-spending EU economies (percentages of GDP); and taxation provides a lower proportion of spending, hence the worries over the debt cap. But there are so many other factors: the regulatory environment; the level of education; the "entitlement" canvas. All one can say with some certitude, at least, all I can say, is that less government spending is better than more, and less taxation is better than more. That puts me in the tea-pot, probably!
    Source: http://www.lowtax.net/asp/story/front/Obama_Would_Sign_Republicans_ShortTerm_Debt_Limit_Bill____59374.html

  • Jan 10, 2013   United States: treads water

    I suppose we are going to have to welcome the last-minute "fiscal cliff" deal in Washington, although the IMF damned it with faint praise, on the grounds that it could have been worse. Yes, some taxes were raised (but could have been raised much more), and yes, a number of important tax breaks were extended, although others, like the payroll tax cut, were not. A much less-heralded law, the US Job Creation and Manufacturing Competitiveness Bill, a compilation of vast numbers of tariff-cutting measures, may do more for US manufacturing pending major changes to the Tax Code, which seem as far off as ever. Strange though that this Bill was introduced on the very day that the much-criticized 112th Congress was to dissolve, leaving it in a kind of purgatory designed for bills that are not sufficiently loved to be passed, but not sufficiently disliked to be abandoned, with no-one knowing whether they will eventually be consigned to the dustbin of history or elevated to glorious currency in the new Congress.
    Source: http://www.lowtax.net/asp/story/front/IMF_Responds_To_US_Fiscal_Cliff_Deal____59047.html

  • Jan 03, 2013   United States: provokes Russia

    Adopting children doesn't seem to be very close to international tax news, but of course in the Magnitsky affair the spring for later events was Russia's admission to the World Trade Organization, and after Russia's crass attack on American adoption of Russian children, there will be consequences for Russian/American trade and cooperation, although it is not easy to perceive yet what they may be. At all events, both countries deserve a black mark for having mishandled the matter, creating a major and unnecessary failure of international diplomacy, and certainly worsening conditions for companies doing business in Russia. The story starts with the Johnson-Vanik amendment in 1974, which withdraws Permanent Normal Trade Relations (PNTR) from countries with human rights abuses. Year after year, Congress has granted a waiver to Russia, but when Russia joined the WTO last year it was obliged to give the country permanent PNTR. This legislation was duly passed, but as a result of the Magnitsky incident (Russian lawyer assumed to have been killed in detention for trying to expose state involvement in the theft of US business assets) clauses were added in the House punishing Russian human rights violators with visa denials and asset freezes. The Magnitsky legislation may be justified, and might even have been effective, but it seemed an error to attach it to a trade bill, and the White House, to its credit, tried but failed to avoid that conjunction. It was inevitable that Russia would respond, and now it has, but in such a heavy-handed way that I fear some further escalation. The chairperson of the Russian Duma's Family, Women and Children Committee called it "using children as human shields." If we're lucky it will all blow over; but it's a sour end to a sour year, and nothing will now help the thousands of children incarcerated in Russian orphanages.
    Source: http://www.usa-tax-news.com/story/Congress_Approves_Permanent_Normal_Trade_Relations_With_Russia____58684.html

  • Dec 13, 2012   United States: socks one to the EU

    One and a half sensible things happened in the USA in the last week: Tom Price (Rep. - Georgia) introduced a bill to prevent Europe's Tobin tax from impacting on US financial institutions, and people started to talk about going over the cliff as if it could even be a good thing. If trimming the EU's extra-territorial ambitions succeeds in making the firebrands at the EU Commission realize that their FTT plan is going to fail, then the US will have done a major service for Europe's citizens as well as its own. The bill is just that, and in the House, not the Senate; but it does stand a chance of getting through. At least the Republicans and Democrats can unite in the face of an attack from Brussels! But it doesn't seem that they can unite on anything much else. The Brookings Institution says that going over the cliff looks by now to be the only way that the warring Congressional factions can be made to compromise: just because taxes will rise on January 1 (which is of course a Bad Thing) doesn't mean that they can't be cut again on January 2; and if the mandated cuts in expenditure are irreversible then that's a Good Thing. But, only half a cheer on that score.
    Source: http://www.lowtax.net/asp/story/front/Price_Bill_Would_Stop_EU_FTT_Enforcement_In_US____58616.html

  • Nov 01, 2012   United States: gets real

    The IRS has postponed FATCA, which is the next best thing to abandoning it altogether, and much as the IRS would always like to collect more tax, it must be thinking that there are easier ways of making a living. Given the enormous extra work-load that's going to be put on the agency next year as a result of ObamaCare and the last-minute dismantling of the fiscal cliff which will have to take place during the 'lame-duck' session of Congress next month, another load of bureaucracy under FATCA is the last thing it needs, so the top brass, whatever its private political persuasions, must be hoping for a 3-way Republican victory which would see the abolition of both ObamaCare and FATCA. Dream on, guys! It ain't gonna happen, unfortunately.
    Source: http://www.lowtax.net/asp/story/front/IRS_Extends_FATCA_Timetable____57997.html

  • Oct 25, 2012   United States: being internationalist

    At a time when the US Administration's free trade credentials are looking tarnished, it's good to see progress being made on an East African trade agreement. There used to be a time when the US could be relied upon to be internationalist; that is long gone, unfortunately, although not all of its standard-bearers have gone. Henry Kissinger remains to remind us of how things used to be at the State Department. But where are the likes of Cyrus Vance? Anyway, with elections only a month away, it is pointless to hope for better right now: free trade is always the first casualty at the hustings. I'm going to make sure to send Mitt Romney a free trade bible (the Wealth of Nations) in case he wins - anything to stop him from making his promised egregious 'currency manipulator' declaration on China.
    Source: http://www.lowtax.net/asp/story/front/East_Africa_US_Announce_Progress_Under_Trade_And_Investment_Partnership____57924.html

  • Oct 18, 2012   United States: United States turns anti-green

    Amazingly, the US Congress still hasn't abolished the Commerce Department, despite my cogently argued pleas. Now that Commerce has unburdened itself of a ludicrously excessive demonization of Chinese solar cell manufacturing (how can you 'dump' items at a margin of 249.96%?), can't everyone see that apart from incensing the country's biggest trading partner, this behaviour is shredding the administration's trade credentials and doing serious damage to a major 'green' initiative (because the only result of doubling the cost of solar panels will be to throttle the growth of renewable energy). And all in response to the protectionist yelping of a tiny group of uncompetitive manufacturers. I know this is the second bad mark I have given the US on this score, but it is deserved; and when (not if, I suppose) the International Anti-Trade Comisssion gives its 'affirmative determination', there'll be another one. The ITC should be abolished as well as Commerce. I suppose I should be giving the US a star for allowing businesses to make money regardless of economic sanity, but try telling that to the solar panel installation firms that will go out of business as a result of the anti-dumping duties.
    Source: http://www.lowtax.net/asp/story/front/US_Confirms_Increased_Duties_On_Chinese_Solar_Cells____57752.html

  • Sep 27, 2012   United States: Congress isn't helping

    Senator Carl Levin (Dem. - Michigan) is having another go at US companies which quite legally take advantage of the Byzantine US tax code to minimize their taxes. Of course he knows that there is no chance of passing the legislation he wants in this Congress, and we know he is electioneering. In the same week, and showing just slightly more grasp of reality, the House of Representatives held a hearing on capital gains taxes. It's difficult to see why: everyone knows there will be no legislation this side of the election. I suppose they have to do something with their time. The real problem that America has got is not the high tax rate as such, or even the Tax Code, laughably complicated though it is, it's the Congress itself. How has this august and once near perfect institution got itself into such a state that it is simply incapable of dealing with the nation's problems? I'm not going to try to answer that question; I am not competent. All I can do it to lament the situation, point out that this kind of ineffective, adversarial political buffoonery is doing nothing to help American companies or the economy, and beg the Congress to reform itself, even if it means a revised Constitution. The situation must not be allowed to continue, especially since the likely result of the November elections is a continuation of the Obama presidency and a hung Congress for at least another two years.
    Source: http://www.lowtax.net/asp/story/front/US_Multinationals_Back_On_Levins_Tax_Radar____57450.html

  • Sep 20, 2012   United States: disgracing themselves over trade

    China and the United States are at it hammer and tongs, squaring off for a long-term battle over subsidies, dumping and countervailing measures. It's difficult to say which is more to blame, so I'll blame both of them; and I'd give an execration to the EU as well if it was a country, because it's playing the same game. You can stop reading now if you believe in free trade, and understand why dumping doesn't exist but had to be invented by politicians for electoral purposes. For those who still need convincing, here it is, it's very simple: if Country A can produce widgets more cheaply than Country B, because of having cheap resources (materials, labour etc) then Country B should happily accept those cheaper widgets because it will then either be able to improve the standard of living of its citizens or will in its turn be able to make cheaper cars, or whatever else the widgets go into. And this is true even if Country A deliberately underprices its exports: Country B should smile, and say, thank you very much. Only if Country A systematically sets out to wreck an industry in Country B for long-term competitive advantage is there a case for intervention. That's unusual, and what stops free trade operating is most usually an entrenched labour force, whereas the correct response for the country concerned is to re-train the people affected, not protect them, which simply exacerbates the problem. You can see why politicians, with notoriously short horizons, fail to behave as they should, and prefer instead to go to war. At least nowadays it's usually just with words.
    Source: http://www.lowtax.net/asp/story/front/China_US_Exchange_Trade_Dispute_Blows____57373.html

  • Aug 30, 2012   United States: a Democrat talks up trade - what's going on?

    It's not quite a Damascene conversion, but it's not far off, and it's especially remarkable that Max Baucus (Dem. - Montana) should go to New Zealand to talk about trade this close to an election. Perhaps I'm being naive; maybe his real motive was to tell the New Zealanders to get their hands off the US automotive industry. But I'll take him at face value, and award him a star for at least pretending to be a friend of free trade quite convincingly.
    Source: http://www.lowtax.net/asp/story/front/Baucus_Goes_To_New_Zealand_To_Talk_About_TPP____56924.html

  • Aug 02, 2012   United States: Congress takes a tiny step towards sanity

    It is no surprise perhaps that the US House of Representatives should have passed a bill which would cancel the upcoming requirement for banks in the US to report interest payments made to non-residents, and it is not correct for me to treat the House as equivalent to the government itself, when it seems unlikely that the Senate or the President will countenance the bill. But in a situation where the Congress is completely paralyzed, any sign of positive activity has to be wecomed, and if the Republicans gain control of the Senate in November then the law will probably get through. Hopefully FATCA will be slung out as well. The interest reporting requirement is so hoary that it is almost invisible behind its whiskers. Orginated by Larry Summers sometime in the last century, it was the US's contribution to the anti-offshore pogrom of the 1990s. Anyway, new or old, it is a Bad Thing and will do lots of damage to US banking.
    Source: http://www.lowtax.net/asp/story/front/US_House_Backs_Cancellation_Of_IRS_Reporting_Rule____56585.html

  • Jul 26, 2012   United States: agreeing to disagree

    The USA and Canada don't do a lot of furiously raging together; their spats are usually conducted in very polite terms, as witness the dispute over Canada's timber exports to the US, which have lumbered ponderously along for at least five years, and may, just may, have reached a conclusion which both sides accept, even if with some reluctance on the part of the US. The important point is that the parties accept the rule of law, and have fairly punctiliously stuck to the required procedures during the various stages of the long-drawn-out game. That is not always the case with international trade-squabbling: all too often the participants game the system mercilessly on the principle that, the more you ask for the more you get. But that is not a good idea in principled negotiation. Although countries are not people, their negotiators are, so that concepts of fairness and the tendency towards altruism can operate even at national level. 'Beggar-my-neighbour' is not a successful strategy in international affairs. More likely you will beggar yourself.
    Source: http://www.lowtax.net/asp/story/front/US_Canada_Agree_To_Disagree_Over_Lumber_Ruling____56446.html

  • Jul 12, 2012   United States: tin ears in Washington

    I hate to give the US another minus point, which will push it down into negative territory. It is still the biggest homogeneous market in the world, give or take a few cross-border annoyances like sales tax, and still ranks high up the scale in terms of business friendliness. But would you place an international business in the US rather than say in Ireland or Hong Kong? (What this ranking process is supposed to be about.) From a tax perspective, the answer is a no-brainer. On other criteria, the picture is more nuanced, and one big issue for incoming businesses would have to be economic stability. Here, the dysfunctional Congress and administration is a serious problem. There is the fiscal cliff; there is the large and growing debt; there is the generally anti-internationalist stance of US policy in recent years. You really have to stop and think. Suppose it goes wrong? So from that perspective the tired old dance being carried on between the administration and the Republicans has become a serious negative. How can they be so self-fixated as not to realize the damage they are doing to the investment plans both of existing US businesses and putative new ones, whether domestic or foreign? Yet, it's unfortunately obvious that nothing is going to change this side of the election. So, a bad mark!
    Source: http://www.lowtax.net/asp/story/front/Obama_Repeats_Call_For_Only_MiddleClass_Tax_Cuts____56302.html

  • Jun 21, 2012   United States: accepts the inevitable

    It may be acting out of self-interest (Adam Smith would have approved) but the US Senate's proposal to reset the country's trading relationship with Russia to 'Permanent Normal Trading Relations' after 38 years of an adversarial stance under the Cold War Jackson-Vanik amendment is a step in the right direction. And it's even bi-partisan, so it will probably go through. But why has it taken more than 20 years for it to happen (since that Wall came down and Saint Boris stood on a tank? In fact, it's only happening now because Russia is joining the WTO, and the Senate doesn't really have a choice. Oh well, musn't carp!
    Source: http://www.lowtax.net/asp/story/front/US_Bill_To_Establish_Normal_Trade_With_Russia____55885.html

  • Jun 15, 2012   United States: Three cheers for the KORUS

    Not quite sure what a KORUS would be if you met one on a dark night; perhaps it would be cuddly and live in a tree in Australia. As I'm sure you know, our KORUS is the Korea/USA free trade agreement, which has already had more lives than a cat, being given up for dead umpteen times courtesy of the opposition in the USA (does the Democrat party count as opposition? at least it was for most of KORUS's nine lives) and in Korea, where only an unexpected miracle in the shape of the re-election of the Grand National Party last April saved the young KORUS from certain death. So, full credit to both countries for having persisted against heavy odds, bringing the promising animal to life. It will do more good than any cat ever did. Sorry, Mehitabel. And yes my name is Kitty.
    Source: http://www.lowtax.net/asp/story/front/South_Korea_US_Conclude_First_Review_Of_KORUS_FTA____55860.html

  • May 24, 2012   United States: being anti-trade, protectionist

    Another easy target nowadays is the United States, still under the baleful, baneful influence of anti-internationalist Democrats. The craven Commerce Department needs to be abolished, as actually proposed by failed presidential candidate Ron Paul; unfortunately it is still very much alive, hammering nails into the coffin it is building for American industry. Its latest crime is of course the decision to impose anti-dumping duties on imports of Chinese solar panels, in defence of America's uncompetitive and highly subsidized manufacturers. Commentators immediately pointed out that for every job that might be saved, ten would be lost in the installation sector as customers choose not to buy over-priced panels. Why is it so hard for people to understand that if a foreign country wants to give you cheap goods, you should smile happily, accept the willingly-offered present and retrain as a maintenance technician?
    Source: http://www.lowtax.net/asp/story/front/US_Imposes_AntiDumping_Duties_On_Chinese_Solar_Cells____55532.html

  • May 17, 2012   United States: against the world

    Speaking of illiberal legislation, perhaps it is unfair to penalize the US Congress for introducing a law which stands no chance of being passed; but businesses take decisions every day, not just on election night, and heavy-handed attempts to force companies to repatriate overseas jobs with unworkable and restrictive legislation will have the opposite effect of encouraging companies to invest anywhere other than in the US. The way to encourage business growth is to reduce taxes, not invent new ones; but the Democrats aren't listening.
    Source: http://www.lowtax.net/asp/story/front/Democrats_Introduce_InSourcing_Bill_Into_US_Congress____55430.html


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