Income Tax: investment US Tax
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Tax Incentive to Start US Economic Engine
GDP growth
The recession was over a year ago, but the economy has not shown enough steam to move ahead to stimulate job and spending growth.
GDP data is showing a continued existence of unemployment, spending contraction, poor business environment and housing market, which will continue to inflict pain of recession on the US economy.
This brings us to the inevitable tax changes on the personal and business income in 2011. It is pretty much confirmed, in US people making over $250,000 will bear a higher tax burden in 2011.
With the GDP results, US President Obama, tried to gain support for his proposal for accelerated tax write-offs for business investments for equipment.
Reason being, businesses will invest in new equipments, hire skilled workers and increase productivity and save on income tax.
But smart businesses will look at the GDP data and the future outlook is not rosy enough for them to beef up productivity and start hiring, just to increase stored inventory.
This time, sustained economic recovery’s main catalyst is real recovery in the labor market. Until people have jobs and businesses gets confidence to hire new employees, US is faced with a continued slow or negative growth in the economic recovery from recession.
After spending increase in this holiday season, the first quarter of 2011 GDP is expected to contract and nose dive confirming, US businesses does not have confidence in published economic recovery news in the media or by the politicians.
Income Tax Tax Fraud: Tax Fraud US Tax
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UBS Betrayed its Customers in Tax Case
Zurich based UBS the largest Swiss bank, acquired customers from all over the world, on the promise that their information would be protected and kept secret. The U.S. Justice Department filed a criminal case against UBS AG, that the bank conspired to defraud the U.S. by helping 17,000 Americans to evade taxes hiding money from the Internal Revenue Service.
To avoid prosecution, UBS broke the veil of Swiss bank secrecy to its loyal customers and admitted to the charges by U.S. Justice Department. UBS paid US$780 million, admitted helping tax evasion from 2000 to 2007 and handed over data on more than 250 U.S. clients. UBS later turned over information on additional 4,450 US account holders.
UBS signed an agreement with the prosecutors to end its cross-border business and co-operate with the U.S. government and identify the American account holders. With this agreement UBS avoided the prosecution and U.S. dropped the criminal case against UBS.
This agreement raises a serious question about the loyalty of corporations to its customers. Swiss banks are known for the protection of their customer’s information. If they fail to perform their duty to their customers, should the customers bring legal action against the corporation?
The Bank do not have the information if taxes were paid or not on the deposit of account holders. Out of 17,000 US account holder, I wonder how the bank decided to turn over selected account for tax evasion to the U.S. government.
Income Tax Tax Fraud: IRS Tax Fraud Tax Rate US Tax
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Google’s Tangled Weave of Tax Strategy
Fantastic reporting by Bloomberg on Google’s income tax strategy.
New words to learn,
Income Shifting
Transfer Pricing
Double Irish
Dutch Sandwich
Advanced Price Agreement
US corporate income tax rate is 35%. Google’s foreign income tax rate is 2.4%. By shifting earning source from US to Ireland Google’s effective income tax rate is 2.4% on the foreign earnings portion of it revenue.
Is it Legal?
It is absolutely legal. It is approved and heartedly supported by US Congress. Any change to this tax strategy is opposed by US congress. In February, the Obama administration proposed measures to curb shifting profits offshore, part of a package intended to raise $12 billion a year over the coming decade. The Proposals haven’t advanced in Congress at all.
US treasury officials estimate the current policy change in Income Shifting and Transfer Pricing would raise $86.5 billion in new revenue over the next decade. But the policy change was opposed by Congress as they were lobbied by companies, i.e. General Electric Co., Johnson & Johnson, Starbucks Corp., according to federal disclosures compiled by Center for Responsive Politics.
From 2006 to 2009, US treasury lost about $60 billion in tax revenue due to this practice of Income Shifting by leading US companies.
Transfer Pricing Strategy is approved by IRS (Internal Revenue Service). IRS approved Google’s transfer pricing strategy for tax savings in 2006 after three years of negotiation. IRS gave its consent in a secret pact known as advanced pricing agreement. Under the agreement IRS approved the price of licensing of Google’s search and advertising technology and other intangible property for Europe, the Middle East and Africa.
Companies work for shareholders. It is management’s job, to give shareholder’s interest a priority. Larger profit and boosting share price is what shareholders prefer. The no. 1 way to boost earning is income tax strategy to pay less tax. Just by bringing down the effective tax rate from 35% to 2.4% Google boosted its earnings by $3.1 billion. It’s money in the pocket of shareholders. Google’s share price is $607. If Google had paid the $3.1 billion in tax, it share price would have been $100 less.
Simple, but Not so Simple Solution to this Tax Avoidance Strategy:
There is a very simple solution to make companies liable to pay fair share of their tax, like all American do.
Companies report earnings in their quarterly earnings report. All IRS need to do is make sure that the companies pay 35% tax on their pretax earning.
For Example, say Google reported $1.5 billion in pre tax earnings in the quarter. IRS needs to check, how much Google paid taxes on the pre tax earnings. At 35% corporate tax rate, Google should pay $525 million in corporate tax. If they paid any less than $525 million in tax, IRS just need to send them a bill for the difference and enforce the same kind of collection tactic they use on average American people for a tax avoidance and maybe put some of the executives in jail for tax avoidance strategy.
Google is doing nothing illegal. So, the Congress should first decide, if they will stand up to corporations and account them for their due share of income tax. Now that is not simple.
Income Tax: Green Card IRS US Tax
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Want to Avoid Tax? Denounce your Citizenship!
An increasing number of US citizens and green card holders want to give up their green cards or US citizenship after the country’s heavy budgetary deficit and a drive to trace unreported income through tighter tax laws and disclosure norms.
Tax laws in the US empower the Internal Revenue Service (IRS), to tax global incomes of those holding US citizenships or the green card. According to reports published internationally, more »