Monday, September 24, 2012

Monday Morning Links

Miscellaneous material for your Monday reading.

- The Economist adds a noteworthy voice to the chorus calling for greater tax enforcement to ensure the corporate elite pays its fair share:
Characterising this steady financing as short-term lending is “the ultimate example of form over substance” and undermines a fundamental tenet of American tax policy, huffed Mr Levin. When an HP executive tried to insist the manoeuvre did not constitute profit repatriation, the senator wielded an internal HP document in which it was discussed—in the repatriation-strategy section. The Senate investigators said they suspected other companies were doing the same thing but couldn’t say how prevalent the practice was.

Who to blame for all this darting through loopholes? To no one’s surprise, Mr Levin pointed the finger mostly at the companies that engage in “tax alchemy”.
The rule-setters and enforcers deserve their share of the blame. It is true that enforcement of arm’s-length deals is tricky because no two intangible assets are quite the same, making it hard to establish a fair price. Moreover, the IRS has to rely in part on the taxpaying company’s own projections of cash flows, risks and so on. But the agency leans too often on the side of leniency. It does not help that transfer-pricing regulations have grown unwieldy. Some experts describe them as unworkable.

The Financial Accounting Standards Board also took some flak at the hearing. Jack Ciesielski, an independent accounting expert, was scathing about a FASB exception that allows firms to avoid reporting and reserving for American tax liabilities for foreign earnings if they plan to invest these “permanently” overseas—a loophole that they continue to exploit even as they lobby for a tax break so they can bring those same profits home.

By focusing on a few striking cases, Mr Levin and his staff have increased their chances of making a splash with an issue that many find mind-numbingly technical. And profit-shifting is, as he put it, doubly problematic today, given the fragility of the economy and the fact that corporate-tax receipts are at historic lows as a percentage of federal revenue. Expect the IRS to take a dimmer view of avoidance schemes going forward. Whether it will prove a match for the multinationals’ phalanxes of lawyers and beancounters is another matter.
- In case there was any doubt how the power imbalance between employers and workers in Canada is being exploited, CJME confirms that gas station attendants in Saskatchewan - as in Ontario and elsewhere - are being encouraged to risk life and limb to avoid being docked pay based on gas theft. And Wendy Stueck reports on the unsafe living conditions facing temporary agricultural workers in British Columbia.

- For those worried that Robocon wasn't being investigated beyond the most glaring case in Guelph, Stephen Maher and Glen McGregor confirm that Elections Canada is looking into plenty more citizens' concerns.

- Dr. Dawg and Colby Cosh tear into the Globe and Mail and its public editor for a pitiful response to compelling concerns about plagiarism.

- Finally, Rick Mercer rants as to why we need to rant more often. But I'll add that while a good rant can help to define a problem, the words don't go far if not paired with some plan to solve it.

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