Arkansas ends ties with UBS
From swissinfo.ch
Troubled bank UBS has been dealt another blow in the United States. The pension fund for public employees in Arkansas will end its relationship with the bank.
Trustees voted to end the contract with UBS over the US justice department’s probe of the Swiss banking giant, in a move announced on Sunday.
Officials in Arkansas said that UBS currently manages around $160 million (SFr173 million) in stock market investments for the pension fund.
The state’s teacher retirement scheme - a separate entity - has around $532 million invested with UBS.
The Internal Revenue Service has sued UBS to try and force the bank to hand over information on around 52,000 account holders. The agency says that these account holders have an estimated $14.8 billion in assets and are using Swiss bank secrecy to shield the money.
UBS has asked for a Miami federal judge to deny the IRS petition.
IRS Audits Target Wealthier People and Companies
By WebCPA Staff, WebCPA.com
The Internal Revenue Service has increased its audit rates of the wealthiest individuals and corporations, according to testimony by IRS Commissioner Douglas Shulman.
Shulman told a hearing of the House Appropriations Committee’s Financial Services Subcommittee that, in fiscal year 2008, the IRS conducted nearly 1.4 million examinations of individual tax returns, an 8 percent increase over fiscal year 2006. The audit coverage rate also rose from 0.58 percent in fiscal year 2001 to 1.01 percent in fiscal year 2008.
“While the growth in examinations of individual returns is visible in all income categories, it is most apparent in examinations of individuals with incomes over $200,000,” said Shulman in his prepared testimony. “Audits of these individuals increased from 105,549 in FY 2007 to 130,751 during FY 2008, an increase of 24 percent. Their coverage rate has risen from 2.68 percent in FY 2007 to 2.94 percent in FY 2008.”
In the business arena, he added, audit coverage rates for small corporation returns (with assets under $10 million) increased slightly over fiscal year 2007 by 0.03 percent. However, coverage rates for three classes of large corporations with assets between $50 million and $250 million and higher all increased. Coverage rates for partnership returns stayed even as compared to fiscal 2007, while Subchapter S returns reflected a small 0.05 percent drop due largely to an increase in the number of S corporations. The coverage rate for tax-exempt organizations increased slightly.
Rep. Jose Serrano, D-N.Y., pointed out during the hearing that Shulman’s figures contradicted the findings of Syracuse University’s Transactional Records Access Clearinghouse, which showed that audit rates for wealthy individuals had declined steeply (see IRS Audit Rate for Millionaires Plummets). Shulman disputed those findings, saying, “We think some of it is wrong and some of it is looking at unfair comparisons,” according to Reuters. The IRS’s own Web site, however, shows that the agency audited about 5.6 percent of individuals making over $1 million in fiscal 2008, compared to 6.8 percent in 2007.
The IRS Criminal Investigation Division has also been vigorously attacking egregious tax avoidance, money laundering and other financial crimes, Shulman noted. The overall number of individuals charged in an information or indictment rose from 2,323 in fiscal 2007 to 2,547 in fiscal 2008. Over the same period of time, prosecution recommendations for employment tax evasion more than doubled. The incarceration rate in these investigations was 81 percent and the average sentence was 29 months.
In fiscal 2008, IRS-developed cases related to foreign and offshore issues also resulted in 61 criminal convictions, and the average term for those going to jail was 32 months. For the first four months of fiscal 2009, there were 20 convictions, and the average sentence was 84 months.
President Obama Outlines Plan to Close Tax Loopholes, Raise U.S. Revenue
From pbs.org
President Barack Obama outlined a series of steps Monday aimed at overhauling U.S. tax policies that he says reward companies for shifting American jobs overseas and allow wealthy people to avoid paying taxes by using offshore accounts.
The president expressed his wishes to raise taxes on the overseas profits of U.S. companies and to go after evaders who abuse offshore tax shelters.
Mr. Obama said the existing laws make it possible to “pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y. ”
The White House estimated the plan would inject $21 billion a year into U.S. coffers over the next decade, but that would amount to only about 2 percent of next year’s projected deficit of $1.2 trillion, however.
Under existing laws, companies with operations overseas pay U.S. taxes only if they bring the profits back to the United States. As long as those earnings are plowed back into the foreign subsidiaries, they can defer paying taxes indefinitely. The president’s plan, which would take effect in 2011, would change that.
The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances. Aides said that was the most recent year available for analysis, according to media reports.
Critics say those rules encourage businesses to bolster foreign operations instead of creating jobs in the U.S. During his campaign last year, Mr. Obama promised to change those provisions.
Drew Lyon, a tax expert at PriceWaterhouse Coopers, told Reuters the changes to the “deferral” provision would be sweeping, since half of multinationals firms’ income is earned abroad.
“It’s really hitting most Fortune 100 companies that depend to a great deal on growth of foreign markets for growing their total earnings,” Lyon said.
The president also said he would close loopholes and bolster enforcement to prevent tax avoidance by companies and individuals.
“The steps I am announcing today will help us deal with some of the more egregious examples of what is wrong with our tax code,” he said at a joint announcement with Treasury Secretary Timothy Geithner.
Democratic Montana Sen. Max Baucus, chair of the Senate Finance Committee that writes tax legislation, offered a tepid response to the president’s proposals, signaling that they could be a hard sell in Congress.
“Further study is needed to assess the impact of this plan on U.S. businesses,” he said Baucus. “I want to make certain that our tax policies are fair and support the global competitiveness of U.S. businesses.”
But several lawmakers, including House Ways and Means Chairman Charles Rangel, signaled support for Mr. Obama’s proposals.
In March, 200 companies and trade groups like the U.S. Chamber of Commerce sent congressional leaders a letter opposing changes to the “deferral” provision. The letter said the firms would not be on a level playing field with international rivals, many of which are not required to pay taxes at home on overseas entities. Pfizer, Oracle, Microsoft Corp, Johnson & Johnson and General Electric were among the firms that signed the letter.
Under President Obama’s plan, companies would not be able to write off domestic expenses for generating profits abroad. The goal is to reduce the incentive for U.S. companies to base all or part of their operations in other countries.
The president said the government also is hiring nearly 800 new IRS agents to enforce the U.S. tax code.
In addition to the changes to the deferral provisions, separate proposals in Mr. Obama’s plan would raise $95 billion by cracking down on overseas tax havens. Such tax havens became a major topic at the April meeting in London of leaders of the Group of 20 major economies.
In one of the proposals to crack down on tax evasion, the administration would require financial institutions to share information with the IRS about customers in the U.S. Foreign institutions and sign up with the IRS to become “a qualified intermediary” or else face a presumption that they are helping individuals evade taxes.
Some consumer advocates said the changes were long overdue fixes for tax abuses.
Swiss banking giant UBS AG acknowledged in February that it helped U.S. clients conceal assets from their government. It agreed to pay a $780 million fine and has since identified about 320 of its American clients.
But the administration is not seeking to repeal all overseas tax benefits. Mr. Obama called his proposal “a down payment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations.”
“Nobody likes paying taxes, particularly in times of economic stress,” he said. “But most Americans meet their responsibilities because they understand that it’s an obligation of citizenship, necessary to pay the costs of our common defense and our mutual well-being.”
The president said the current tax code makes it too easy for “a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all.”
He said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade. But administration aides said 75 percent of those tax credits cover the cost of workers’ wages.
Geithner said the proposals would end “indefensible tax breaks and loopholes which allow some companies and some well-off citizens to evade the rules that the rest of America lives by.”
He called them “common-sense changes designed to restore balance to our tax code.”
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