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Bramwell’s Lunch Beat: Tax Refunds Being Used Less for Savings, Debt Reduction

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Feb 10th 2015
Staff Writer and Editor AccountingWEB
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Career booster for CFOs: Work experience abroad
International experience has become increasingly important in the finance suite, wrote Kimberly S. Johnson of the Wall Street Journal’s CFO Journal. Nearly 40 percent of CFOs at the largest 1,000 public and private companies in the United States have worked abroad, and that figure is expected to rise, according to recruiter Korn/Ferry International. The trend follows the money: Companies in the S&P 500 got roughly half their sales outside the United States in 2013, up about 10 percent over the past decade, according to S&P Dow Jones Indices. Years spent in the trenches abroad can help an executive navigate cultural mores, regulations, and supply-chain disruptions, making a CFO with a well-worn passport a valuable asset.

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Survey: Fewer Americans plan to use tax refunds for savings, investments, or debt reduction
A new survey by Taxsoftware.com found that 28 percent of Americans plan to use their federal and state tax refunds for savings or investments, while 33 percent said they will use the money to help pay off debts. This is down significantly from 2007 when a majority of Americans said they would use the refunds for savings (59 percent) or debt reduction (54 percent). In the latest survey, 12 percent said they will use their tax refunds to make home improvements; 12 percent plan to take vacations, buy products, or donate to charities; and 8 percent will pay their mortgages or education loans. Twenty-six percent said they will use the funds for other purposes. “As the economy has improved over recent years, taxpayers have shown that they are much less interested in using tax refunds to build up savings or pay off debts. Americans obviously think they have more important things to do with their money,” said Taxsoftware.com spokesperson Mickey Macedo.

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Hard cider, propane poised to win as Senate mulls tax breaks
Makers of propane and hard cider are among the likely winners as the Senate Finance Committee prepares to vote this week on a package of tax breaks, wrote Richard Rubin of Bloomberg. The committee announced on Monday that it will consider 17 bills on Wednesday. Other potential winners may include military spouses, real estate investment trusts, tax delinquents hospitalized in combat zones, and companies planning to convert waste heat into power. The propane measure would lower the excise tax on propane so that it’s no longer taxed at the same rate as more energy-dense gasoline. The propane tax rate would decline to 13.2 cents per gallon from 18.3 cents. Cider produced from pears – not just apples – would become eligible for the cider tax rate under the proposal.

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Senators take aim at corporate write-off
Sens. Chuck Grassley (R-IA) and Jack Reed (D-RI) want to make sure that corporations don’t get a tax break for paying off a settlement, wrote Bernie Becker of The Hill. Corporations currently can’t deduct a fine paid to the government as a legitimate business expense. But Grassley, a former Senate Finance Committee chairman, and Reed want to bar companies from writing off any part of a settlement that wasn’t handed over to the government, as some currently do. Under the senators’ proposal, the government and a company would have to hash out a pre-filing agreement on how to treat a settlement for tax purposes.

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Tax credits cut average Affordable Care Act premiums to $105
Less than a week before Obamacare enrollment closes on Feb. 15, federal regulators said on Monday that the average monthly premium after tax credits ranges from $47 in Mississippi to $172 in New Jersey, wrote Jayne O’Donnell of the USA Today. The average monthly premium after tax credits for health insurance policies on HealthCare.gov is $105, the Department of Health and Human Services' (HHS) Monday report showed. That's up from an average of $82 a month last year. Almost 6.5 million consumers qualify for an average “advanced premium tax credit” of $268 per month through the federal exchange that serves those in the 37 states that didn't set up their own marketplace, HHS says. Premium tax credits reduced consumers' monthly premiums by 72 percent, the new federal report found. The average monthly premium for 2015 coverage dropped from $374 before tax credits to $105 after tax credits.

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Cigarette taxes and cigarette smuggling by state, 2013
The trend of state and local governments increasing taxes on tobacco products has created lucrative incentives for black market cigarette trafficking between states. As a result, the sale of smuggled cigarettes is on the rise nationwide, according to the latest report from the Tax Foundation. Using the latest data from the Mackinac Center for Public Policy, the report details each state’s total inflow or outflow of smuggled cigarettes in 2013. New York is the highest net importer of smuggled cigarettes, totaling 58 percent of the total cigarette market in the state. New York also has the highest state cigarette tax ($4.35 per pack), not counting the additional local New York City cigarette tax (an additional $1.50 per pack). Smuggling in New York has risen sharply since 2006 (+62 percent), as has the tax rate (+190 percent). Smuggling in Illinois has also increased dramatically, from 1.1 percent to 20.9 percent since the last data release. This is likely related to the fact that the Illinois state cigarette tax rate was hiked from 98 cents to $1.98 in mid-2012.

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SEC advances hedging rule
The US Securities and Exchange Commission (SEC) proposed a long-delayed postcrisis rule that would require companies disclose whether employees and directors may hedge against declines in their companies’ stocks, wrote Andrew Ackerman of the Wall Street Journal. The SEC voted unanimously on Monday to propose the rule, advancing one of several unfinished executive compensation requirements of the 2010 Dodd-Frank law. The rule is aimed at giving investors more information about whether executives can skirt company requirements that they hold stock for the long-term by entering into hedging contracts that would allow them to receive their compensation even if their firm doesn’t perform well. The five-member SEC, which voted privately to advance the rule, will collect public comment on the rule for 60 days. It will have to vote on the rule a second time before it can go into effect.

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SEC reinstates former EY UK partner
The SEC has partially lifted a two-year ban imposed on former EY partner Christopher Kelly for failings as an auditor, wrote Julia Irvine of economia. He will now be able to practice as a preparer or reviewer of US-listed companies’ financial statements once again, provided his work is reviewed by the relevant company’s independent audit committee. However, the US regulator has not lifted his suspension as an independent accountant. Kelly was the engagement partner on the audit of UK implant manufacturer TPC, which was acquired by the NYSE-listed Symmetry Medical Inc. in 2003. EY in the United States was Symmetry’s auditor. From 1999 to 2007 TPC engaged in a fraudulent scheme to improperly boost the company’s revenues, net income, and other key performance indicators, including booking fictitious sales revenues and understating costs of goods sold.

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PwC rejects claims of mass-marketing tax avoidance
PwC has rejected a claim by UK Parliament members (MPs) that the Big Four accounting firm is promoting tax avoidance on an “industrial scale,” wrote Nick Huber of AccountingWEB UK. A report by MPs on the Public Accounts Committee (PAC) said PwC promoted hundreds of tax avoidance schemes that artificially divert profits to Luxembourg through intra-company loans. Companies using the schemes have paid less corporation tax, the committee said. Committee chair Margaret Hodge said the evidence PwC gave the committee in January 2013 was “misleading,” in particular its assertions that it was not in the business of selling tax schemes and that it did not mass-market tax products. PwC said in a statement: “We stand by the evidence we gave the PAC and disagree with its conclusions about the work we do. But we recognize we need to do more to explain the positive role we play in the tax system and in helping businesses to operate successfully.”

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HSBC’s Swiss tax files come back to haunt CEO Gulliver
Fresh details showing how HSBC Holdings PLC helped wealthy clients avoid taxes have come to haunt CEO Stuart Gulliver, wrote Richard Partington of Bloomberg. It’s about eight years since computer technician Herve Falciani took five disks of confidential information from Europe’s largest bank, sparking investigations worldwide. A report from the Washington-based International Consortium of Investigative Journalists on Sunday revealed the depth of HSBC’s handling of secret accounts for an array of criminals. “Gulliver must be absolutely squirming,” said Christopher Wheeler, an analyst at Atlantic Equities in London. Gulliver’s efforts to clean up the bank by spending billions of dollars on compliance and internal controls in the wake of scandals are being overshadowed by the revelations, which have spurred a political outcry. HSBC’s private-banking arm profited for years by handling secret accounts for clients, from arms dealers to drug cartels, according to the report.

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UBS profit boosted by tax gain
UBS AG posted a slight gain in fourth-quarter profit on Tuesday, thanks to a significant tax benefit and a sharp reduction in the amount of money set aside by the Swiss bank to deal with its continuing legal and regulatory issues, wrote John Letzing of the Wall Street Journal. Zurich-based UBS said net profit in the quarter rose to 963 million Swiss francs ($1.04 billion), from 917 million francs in the same period a year earlier. The bank is continuing to apply losses suffered in the wake of the financial crisis to its reported results to slash its tax liabilities and boost profit figures. For the fourth quarter, UBS said its net tax benefit was 493 million francs, higher than some analysts had anticipated and pushed the bank’s result above many estimates. Analysts had expected UBS to post a net profit of 792 million francs for the quarter, according to a poll by the Wall Street Journal.

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