Corporate Loopholes in Tax Law Targeted [WSJ] Microsoft Corp. and Hewlett-Packard Co. used accounting strategies to hold down their U.S. tax bills while shifting profits in and out of the country, according to a Senate subcommittee investigating how multinational companies exploit the intricate U.S. corporate-tax code. Senate investigators said much of the activity appears to comply with the letter of current tax regulations, though they regard some of the practices used by H-P as potentially abusive and subject to challenge. Both tech giants said their strategies are legal. The findings—from one of a series of reports on corporate-tax practices by the Senate Permanent Subcommittee on Investigations—come as Congress prepares for a debate next year on an overhaul of America's business taxes. "Major U.S. corporations are increasingly earning their profits here but shipping them overseas to avoid paying the taxes they owe," said Sen. Carl Levin, the subcommittee's chairman. The Michigan Democrat called these offshore strategies "unacceptable."
My favorite exchange at the hearing was when Levin–referencing data showing huge profits in tax haven subsidiaries with few employees–asked IRS Deputy Commissioner Michael Danilack: "Where does common sense come in?" Danilack explained that nothing in the tax law required the IRS to look at the number of employees and the distribution of profits relative to the distribution of employees. Hey, it's not the fault of the IRS. Congress needs to change the law–rid it of its obsession with the arm's length standard–and start injecting a little common sense.
Senior Republicans say they will be forced to retreat on taxes if President Obama wins a second term in November, clearing the biggest obstacle to a deal with Democrats to defuse a year-end budget bomb that threatens to rock the U.S. economy. Republicans have long resisted tax increases of any kind. But taxes are a major battleground in the campaign between Obama and Republican Mitt Romney, Capitol Hill veterans say, and the victor will be able to claim a mandate for his policies. “This is a referendum on taxes,” said Rep. Tom Cole (R-Okla.), a senior member of the House Budget Committee. “If the president wins reelection, taxes are going up” for the nation’s wealthiest households, and “there’s not a lot we can do about that.”
Apple Poised to Sell 10 Million IPhones in Record Debut [Bloomberg] So that's nice.
Apple's home-grown Maps leaves users lost [Reuters] Not so nice.
Checks for vendors stolen from Obama campaign headquarters in Chicago; police investigating [AP] Three checks for campaign services have been stolen from President Barack Obama’s national campaign headquarters in Chicago. Midwest Press Secretary Ben Finkenbinder says the checks were to be sent to vendors but “made it into the wrong hands.” He says the campaign notified police that he doesn’t expect the theft to have any impact on the campaign.
Alleged Seattle park masturbator: I was getting ‘some sun’ [SPI]
A five-time convicted flasher may have thought he found a way out of another charge when he was arrested in a North Seattle park last month. Confronted by Seattle police after a report that he was masturbating in Cowen Park, Tracy J. McDonald purportedly blamed the weather. At 5:45 p.m. on Aug. 8, a 23-year-old woman walking her dog spotted McDonald topless with his pants around his ankles, Seattle Detective Donna Stangeland said in court documents. McDonald was masturbating, the woman told police, and staring at her. Police arrived and found McDonald, who claimed he was sunbathing. “He said he was getting ‘some sun,’” Stangeland told the court. “There was absolutely no sun where he was standing."
Is Obama Smart? [WSJ]
When it comes to piloting, Barack Obama seems to think he’s the political equivalent of Charles Lindbergh, Chuck Yeager and—in a “Fly Me to the Moon” sort of way—Nat King Cole rolled into one. “I think I’m a better speech writer than my speech writers,” he reportedly told an aide in 2008. “I know more about policies on any particular issue than my policy directors. And I’ll tell you right now that I’m . . . a better political director than my political director.”
Sales up at UK arm of Deloitte [FT]
The bigge was the consulting business, which increased its sales by 13 per cent to £517m, aided by the integration of acquired businesses and extra financial services work. Gains in market share lifted auditing revenues 4 per cent higher to £652m, the group said, while the tax and corporate finance divisions posted increases of 5 per cent and 11 per cent respectively. However, the average profit distributed to each partner fell 13 per cent from £873,000 to £758,000 because of the cost of making new hires and increasing pay to retain existing staff.
Markets Sink Then Soar After Fed Speaks [WSJ]
The Federal Reserve sent investors lurching from worry to hope as it warned that the economy would remain weak for some time but said it was prepared to take further steps to shore it up. The Fed’s statement, which included plans to keep interest rates near zero for at least the next two years, ultimately sent the Dow Jones Industrial Average up 4%, its biggest daily gain since March 2009. Yields on Treasury bonds dropped as investor demand pushed up prices.
For Murdoch, a Board Meeting With Friendly Faces [NYT]
One [director] is a former Goldman Sachs president who helped News Corporation broker mega-deals. Another is godfather to one of Mr. Murdoch’s grandchildren. Another ran Mr. Murdoch’s Australian subsidiary, News Limited. And those are just some of News Corporation’s directors who are designated as independent — chosen because they comply with regulations intended to ensure that companies maintain a layer of objective oversight.
NYSE Seeks to Tighten ‘Reverse’ Deal Rules [WSJ]
The New York Stock Exchange wants to toughen the standards that “reverse-merger” companies must meet to list on the Big Board, in the wake of accounting questions at many Chinese companies that have gone public via such transactions. The exchange is proposing a series of “seasoning” requirements that would effectively delay an NYSE listing for reverse-merger companies and set bars they would have to clear to obtain it.
BofA Doesn’t Need to Raise Capital, Finance Chief Thompson Tells Nomura [Bloomberg]
Bank of America Corp. (BAC), the largest U.S. lender, won’t need to raise extra capital to meet new international standards, Chief Financial Officer Bruce Thompson told Nomura Securities International analysts. The bank will be able to comply by cutting expenses, selling assets and letting some holdings decline naturally as they mature by the time the rules become fully effective, Thompson said in a meeting with analysts led by Glenn Schorr in New York.
A Much Needed Accounting Lesson for Two Senators [Accounting Onion]
Namely, Carl Levin (D-MI) and Sherrod Brown (D-OH).
People on the Move: KPMG Taps Chris Goodman as CMO [AdAge]
Goodman comes from Young & Rubicam and also did stints at Accenture and IMG.
Plante & Moran Elects 9 New Partners and One Affiliated Entity Member [P&M]
Six men and four women.
Swiss to Settle Tax-Evasion Dispute With Germany [Bloomberg]
Switzerland and Germany completed an accord to end a dispute over tax evasion by wealthy Germans holding cross-border accounts with Swiss private banks. As part of the settlement, Swiss banks will pay 2 billion Swiss francs ($2.8 billion) to the German government to cover the failure by their clients to disclose undeclared money in the past, the Swiss finance ministry said today in a statement.
