The Tax Man Drumeth

Posted on by Caleb Newquist
With the sound of the drums echoing off the walls of the surrounding buildings, it feels as if it could be an impromptu street performance – but it's not. This is tax collecting Bangalore-style. Fed up with companies refusing to pay their tax bills, the city has gone one better than merely sending out reminder letters. Instead it is striking back, shaming local tax avoiders, through the use of music. Bangalore has a clear message to offenders: Pay up or we send in the drummers, and then everybody will know what you've done wrong. [BBC via TaxProf]

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Don’t Look Now But There Is Glimmer of Sensible Tax Policy in Congress

A long-overdue measure to limit state taxation of non-residents has cleared its first committee, reports the Tax Policy Blog. The House Judiciary Committee approved H.R. 1864, the Mobile Workforce State Income Tax Simplification Act, which provides:

An employee’s wages or other remuneration shall be subject to state income tax only in either:

-the employee’s state of residence, or

-a state where the employee is present and performing employment duties for more than 30 days during the calendar year. A day counts if the employee performs more employment duties in that state than in any other state during that day. Travel time does not count.

For traveling taxpayers, that’s good news. Lord knows how many loyal Going Concern readers flit from state to state in their unceasing efforts to ensure that the Nation’s financial statements are fairly stated in all material respects. But it’s also bad news — it reminds us that right now you can be taxable in a state after spending as little as a day there.


Why are the states so greedy? Think of LeBron James. When he visits the Staples Center to beat up the Clippers, the home team may lose, but the Franchise Tax Board wins every time. But the tax law in its majesty applies as much to the newbie auditor sent to count vegetables as to LeBron.

Fortunately for our auditor, the firm will probably tell her how much of her income is taxable in each state. Unfortunately, it won’t do all of the extra tax returns she will have to file in all of the exciting states a modern jet-setting auditor may visit.

H.R. 1864 is a long way from perfect. Its biggest flaw is that it doesn’t protect visiting entertainers or athletes. Sure, LeBron can afford the tax help to file in a couple dozen states, but the same rules apply to minor league ballplayers, comedians trying to become senators, and your friendly struggling road band. Still, anything that helps abused staff accountants isn’t all bad.

The proposal is a long ways from becoming law. The high tax states hate any limitations on their ability to pick visitor pockets. Still, it’s nice to have at least a glimmer of hope for sanity.

(UPDATE 2) News Corp. Appears to Be a Big Fan of Offshore Tax Havens

Sure, GE may have the “best tax law firm” in house but the boys and girls working for Rupes seem to have a few tricks of their own. David Cay Johnston reports:

News Corp. has 152 subsidiaries in tax havens, including 62 in the British Virgin Islands and 33 in the Caymans. Among the hundred largest U.S. companies, only Citigroup and Morgan Stanley have more tax haven subsidiaries than News Corp., a 2009 U.S. Government Accountability Office study found.

News Corp. had nearly $7 billion permanently invested offshore in 2009, money on which it does not have to pay taxes unless it brings the money back to the United States. Meanwhile, it can use that money as collateral for loans in the United States, where interest paid is a tax-deductible expense.

This and other tax planning strategies result in a 20% tax rate for the company. And not a single phone hacked!

[via Reuters]

UPDATE:
Via NPR’s The Two Way news blog, Reuters has posted this statement:

Please be advised that the David Cay Johnston column published on Tuesday stating that Rupert Murdoch’s U.S.-based News Corp made money on income taxes is wrong and has been withdrawn. News Corp’s filings show the company changed reporting conventions in its 2007 annual report when it reversed the way it showed positive and negative numbers. A new column correcting and explaining the error in more detail will be issued shortly.

As of now, Johnston’s post remains unchanged and what I blockquoted above doesn’t seem to be in dispute but the situation appears to be fluid.

UPDATE 2:
Here’s a portion from Johnston’s new column:

Readers, I apologize. The premise of my debut column for Reuters, on News Corp’s taxes, was wrong, 100 percent dead wrong.

Rupert Murdoch’s News Corp did not get a $4.8 billion tax refund for the past four years, as I reported. Instead, it paid that much in cash for corporate income taxes for the years 2007 through 2010 while earning pre-tax profits of $10.4 billion.

For the first time in my 45-year-old career I am writing a skinback. That is what journalists call a retraction of the premise of a piece, as in peeling back your skin and feeling the pain. I will do all I can to make sure everyone who has read or heard secondary reports based on my column also learns the facts and would appreciate the help of readers in that cause.

Johnston goes on to explain in detail how the error occurred. He also states that a number of the facts originally reported, including the number of News Corp. subsidiaries in tax haven (that we blockquoted above), remain.

Pennsylvania’s Tax Amnesty Ad Will Work on the Most Paranoid of Citizens

Pennsylvania’s tax amnesty program started on April 26th and to help taxpayers get off their non-complying asses, this ad has been introduced to motivate Keystone Staters that owe back taxes.

If this doesn’t get Quaker stoners into compliance, nothing will:


Personally, we would liked to have seen the PA Dept of Rev go the route of PICPA and incorporate Snuggies or breathlessly judgmental friends. Although we understand that scare tactics may be effective, a state must be pretty desperate to run this to get taxpayers motivated.

Btw, Philadelphia’s tax amnesty program started today and, so far, is considerably less Orwellian.

Earlier:
Tax Amnesty Programs: A Gold Mine for States or Bad Policy?