Tag Archives | taxes

2017 Tax Planning: As You Sow

I noticed some 2017 Tax Planning advice from Blank Rome LLP and thought to alert readers.  On December 20, 2017, Congress passed its comprehensive tax reform bill, the Tax Cuts and Jobs Act (“the Act” or “the Bill”), which is expected to be signed into law by President Trump in early January 2018. The Bill represents one of the most extensive modifications to the U.S. tax code in recent history, significantly modifying U.S. taxation for individuals and businesses. Most provisions take effect on January 1, 2018, but the time to act is now. You may not like this legislation but it will go into effect regardless. Now is the time to make a huge tax deductible donation to your favorite 501(c)(3). Mine is As You Sow. Continue Reading →

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Directors Forum 2015: Part 2

Stay Or Go

‘Stay Or Go’ Panel

Disclaimer: I’m sharing a few notes from Directors Forum 2015 held at San Diego University beginning 2/25/2015 and ending 2/27/2015. The Forum is held under the Chatham House Rule, so you won’t read any juicy tidbits here. However, I do hope to give readers some flavor of the topics discussed and a little on the general range of opinions. I have take slight liberties with the rule with regard to individual featured speakers, giving some sense of their talks without revealing the specifics of cases raised or providing quoted material of any substance.

Kerrii Anderson

Kerrii Anderson

Directors Forum 2015: Session 3 “Should We Stay or Should We Go? At Play on the Global Stage

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Investors Back Global Tax Reform and Transparency

g20Australia

Global Tax Reform and Transparency Urged

LAPFFIn a global first, a group of institutional asset owners and managers are jointly calling for comprehensive transparency and disclosure to be adopted as core principles in reform of the international taxation system to be put before the G20 Leaders Summit in Brisbane this weekend.

The group including the £150B UK Local Authority Pension Fund Forum (LAPFF), Quebec fund Batirente, Royal London Asset Management (RLAM), Paris based OFI Asset Management & Triodos Investment Management from the Netherlands have issued a  statement supporting the initial stage of the OECD BEPS Action Plan and urging a general improvement in corporate governance, transparency and disclosure  standards around taxation issues.  Continue Reading →

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Corporate Tax Strategies Threaten Wealth Creation: Fiduciaries Must Consider the Impact on Society

Adam Kanzer

Adam Kanzer

Guest Post by Adam M. Kanzer, managing director and general counsel of Domini Social Investments LLC, New York. His responsibilities include directing Domini’s shareholder advocacy department, where for more than ten years he has led numerous dialogues with corporations on a wide range of social and environmental issues. The following originally appeared under the same title in the May 14, 2014 edition of Pensions & Investment. I added a few additional links.

Google Inc. shareholders May 14 rejected by a 93% vote a proposal sponsored by my firm, seeking the adoption of a responsible code of conduct to guide the company’s global tax strategies. I suspect this proposal prompted a quizzical reaction from many investors who assume that minimizing corporate tax payments is good for shareholders. An April 28 Pensions & Investments editorial, Tax exempt but tax conscious, wrestled with this issue, ultimately concluding fiduciaries could not ask companies to pay more. Continue Reading →

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Fix CEO Compensation by Broadening Incentive Pay

The defenders of executive compensation argue that senior executives make the most significant contribution to a company’s success; ergo, outsize compensation is justified. But the NBER Shared Capitalism Research Project has shown the opposite: Distributing rewards across the corporation—sharing them with workers—is the most efficient way of making businesses more successful. Motivated employees are more productive and spur innovation in products and processes…

Freeman, Blasi, and Kruse propose a simple way to encourage companies to follow the Googles and Wegmans of the world: Allow them to deduct incentive pay as a cost of business only if they offer the same incentive program to all workers. In other words, don’t give tax breaks to companies that provide stock options and bonuses to only a few executives. This would correct a major loophole in the tax system with which corporate executives have been enriching themselves at the expense of their stockholders and taxpayers. (The U.S. Tax Code does not allow the deduction of salaries beyond $1 million as a business expense, but it does allow companies to deduct as a cost of business any amounts paid as incentive compensation.)

This proposal is not as radical as it may seem. It is, rather, American capitalism at its best, the extension of a system that has engendered the success of such major companies as Google (GOOG), Apple (AAPL), and Procter & Gamble. The same principles already apply to pension and health-care plans—these are deductible as a cost of business only when they cover every employee. Compensation should be subject to the same rules, which will encourage more companies to extend incentive pay to all workers. And most importantly this change would make U.S. businesses more productive while benefiting workers.

via How to Fix Oversize Executive Compensation – BusinessWeek, 3/25/2011.

According to Corey Rosen, National Center for Employee Ownership:

The ideas here make sense. We have become infatuated with the idea that companies rise and fall based on a few key people. Yet study after study (and the rhetoric of CEOs insistent that “people are our most important asset”) show that the level of employee engagement at work is the single most important determinant of corporate performance. Engaged employees come up with the ideas, large and small, that move companies forward. Companies that share ownership widely grow 2-3% per year faster than would have been expected to otherwise, for instance, their employees have three times the retirement assets, and they are much less likely to go bankrupt.

As I recall, much of the research into employee ownership and worker participation showed tremendous gains when these factors were linked. There was a raft of experiments in the 1970s and 1980s. I, myself, was somewhat involved with Rath Meatpacking when it became the largest worker-owned firm in the United States. In many of these situations productivity shot up but management shut them down because employee participation took power away from them… especially middle management. I like the ideas advocated by Freeman, Blasi, and Kruse. Unfortunately, the Business Roundtable and the US Chamber of Commerce are likely to express strong opposition.

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Encourage Home Ownership, Not Tax Avoidance

We should recognize the dire consequences of our nation’s tax policy, which encourages consumers to amass huge levels of debt when buying a home. Why not reward borrowers who have more equity in their homes instead?

One way to do this would be to provide tax credits to borrowers based on the amount of their down payments. Such a system could be graduated so lower- and middle-income borrowers benefited most, while upper-income borrowers received far less or nothing at all. (Planning a Better Way Than Fannie and Freddie – NYTimes.com, 2/12/2011)

Gretchen Morgenson’s idea would be much less risky than proposed recommendations by Treasury. Get Americans to think like Canadians… putting 10 to 20% down on their home purchases. If abolishing tax credits for mortgage interest payments is another “third rail” for politicians, let’s phase them out by encouraging prudence and thrift. In the end, maybe we’ll start focusing on more productive, less resource intense, investments.

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UK Revolt Against Wealthy Tax Cheats

Imagine a parallel universe where the Great Crash of 2008 was followed by a Tea Party of a very different kind. Enraged citizens gather in every city, week after week—to demand the government finally regulate the behavior of corporations and the superrich, and force them to start paying taxes. The protesters shut down the shops and offices of the companies that have most aggressively ripped off the country. The swelling movement is made up of everyone from teenagers to pensioners. They surround branches of the banks that caused this crash and force them to close, with banners saying, You Caused This Crisis. Now YOU Pay.

According to this report, it is happening in the UK. The UK Uncut message was simple: if you want to sell in our country, you pay our taxes. Just about the only attack against the movement has been Rupert Murdoch. According to Johann Hari, of The Nation, his company, “News International, is one of the world’s most egregious tax dodgers, contributing almost nothing to the US or UK treasuries.” Will Americans establish a progressive Tea Party?  Vision: Everyday Brits Are in Revolt Against Wealthy Tax Cheats — Can We Do That Here? | AlterNet, 2/5/2011.

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Wall Street Pay Breaks Record, Thanks to Taxpayers

Goldman Sachs, JPMorgan, Bank of America, Citigroup and Morgan Stanley benefited from hundreds of billions from TAARP. Higher revenues amplified Wall Street’s bottom lines.

Combined pay at financial firms hit an all-time high last year and the percentage of revenue that went into employees’ pockets climbed from 31.1% in 2009 to 32.5% last year.

As William Alden of The Huffington Post notes, the Federal Reserve $600 billion asset-purchase program, intended to stimulate the economy, has “also been a direct and indirect boon for the banks. As it buys U.S. government debt, the Fed announces its purchases ahead of time, giving certain banks an opportunity to profit on the trades.” (Wall Street Pay Broke Record Last Year., 2/11/2011)

“On a per-employee basis, the average pay and benefits added up to about $141,000, up from $136,000 in 2009 and the previous high-water mark of $138,000 in 2007. High-earning traders and managing directors earn many multiples of the average.” (U.S. Seeks to Defer Portion of Bonuses, WSJ, 2/5/2011)

Yes, it is important to bring the economy back from the brink but why do we reward those responsible for bringing the system down?

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Taxes

Oupa Magashula, Commissioner with the South African Revenue Service commissioner attended a recent meeting of the Organization for Economic Co-operation and Development’s (OECD’s) Forum on Tax Administration in Istanbul recently. I found his Op-Ed, Good corporate governance includes moral view of tax (Business Report, 9/27/2010) to be interesting. Here’s a sample,

In the past 18 months over 500 agreements have been signed allowing for increased exchange of tax information between countries. We at the SA Revenue Service (Sars) will be specifically renewing our focus on improving offshore tax compliance, in particular with regards to identifying the beneficial owners of complex offshore structures.

We plan to leave nowhere for non-compliant taxpayers to hide.

At Sars, we have for many years promoted the notion that there is a moral component to tax compliance and this has seen us at odds with some tax advisors and professionals, who insist tax is simply a cost to be reduced wherever possible.

In a world of tax avoidance and tax gross-ups, I’d like to see a competition among corporations and CEOs about who pays the most taxes. Where is the Forbes list of highest tax payers?

It isn’t only Africa that faces “huge inequities, which cannot be resolved without state involvement.” It isn’t only Africa that needs to “correct imbalances, build infrastructure and stimulate economic growth.” Too many cultures make heroes out of bandits and tax evaders.

The revised IRS Whistleblower statute, Section 7623 of the Internal Revenue Code, provides awards of 15-30% of the amount that is ultimately collected by the IRS to persons who identify underpayments of tax for making a substantial contribution of information. Maybe that will help.

Meanwhile, a BBC World Service global poll across 22 countries found (Governments Misspend More Than Half of Our Taxes–Global Poll, WorldPublicOpinion.org September 27, 2010):

  • people estimated on average that 52 per cent of the money they pay in tax is not used in ways that serve the interests and values of the people of their country.
  • The countries with the lowest average estimate of misspent tax money were Spain (average 34% misspent), Indonesia (40%), Azerbaijan and Egypt (both 42%). The highest were in Columbia (74% misspent) and Pakistan (69%). In the world’s two largest economies, Americans estimate on average that 55 per cent of their taxes are misspent, while in China the figure is 46 per cent.
  • Despite low overall support, there is strong backing for government bank bailouts in major developing nations like India and Nigeria (77%), the Philippines (75%) and China (59%). But the world’s major developed economies have majorities opposed to further government bank bailouts–including Germany (84% opposed), Canada (77%), France and the US (both 68%).
  • In only five countries is the dominant view that in the next 12 months good times will return. All of these are developing countries led by India (62%), Nigeria (61%), and Brazil (57%), as well as China (51%) and the Philippines (43%).
  • The most pessimistic countries–those predominantly expecting bad times–are led by the developed countries of the United Kingdom (58%), France (54%), and also include the US (44%), and Spain (38%).
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