Tax man cometh part II
June 3, 2009 by Chinatex
This just in from the U.S. Internal Revenue Service. Now would be a good time to follow Halliburton and move your company completely out of the U.S. to a place like Hong Kong or Macau. With a 14 trillion dollar national debt, doesn’t look like the taxman is going to let this issue slide and with unemployment at about 12% looks like a lot of people lining up to be tax henchmen. As always, Yeeha!!! Chinatax
IRS Commish Details Global Tax Enforcement Plans
WASHINGTON, D.C. (JUNE 2, 2009)
IRS Commissioner Douglas Shulman laid out the Obama administration’s plans for cracking down on offshore tax evasion, including extending the statute of limitations.
In a speech before the Organization for Economic Cooperation and Development, Shulman noted that the Obama administration has asked Congress to extend the statute of limitations on international tax enforcement from three to six years “after the taxpayer submits required information.”
“These cases are often highly complex and require additional time to resolve beyond the current three-year statute,” said Shulman.
He pointed out that the IRS has been faced with a growing number of foreign tax credits claimed on both individual and business tax returns. Between 2000 and 2007, the volume of foreign tax credits claimed by individuals rose “an eye-popping 133 percent,” Shulman noted, while the volume claimed by U.S. businesses increased 71 percent.
The problem has become a major concern for the IRS. “In the U.S., international tax issues have moved to center stage,” said Shulman. “It is a major priority for President Obama, and last month he outlined a bold suite of international legislative proposals. At the same time, the IRS has been stepping up enforcement measures in this area. We are aggressively tracking down tax evaders hiding their wealth overseas and the promoters who aid and abet these schemes. We are steadily increasing the pressure on offshore financial institutions that facilitate concealment of taxable income by U.S. citizens.”
To deal with the problem, he is hiring more enforcement personnel at the IRS. “For too many years, the IRS was in the position of not having the resources to go toe to toe with taxpayers operating in the international markets,” said Shulman. “They had deep pockets and could hire a cadre of legal and tax experts. Some observers said we were outmanned and outgunned. To meet this challenge, we must keep existing personnel current on emerging techniques and hire top examiners, lawyers, economists, special agents and financial specialists who can unravel the sophisticated and complex world of international tax issues.”
Shulman noted that the stepped-up enforcement efforts had led to a victory in last week’s Appeals Court ruling against chip maker Xilinx, which had sought to shift research and development costs to its Irish subsidiary in a transfer-pricing arrangement (see IRS Wins Transfer Pricing Tax Dispute Against Chip Maker).
Shulman plans to require more enforcement of information-reporting requirements to catch tax evaders.
“We know that those taxpayers who have their taxes withheld and reported to the IRS through third parties are the most compliant,” he said. “On the other end of the scale, those operating without withholding and reporting are the least compliant. What’s the lesson here? Simple: Better information reporting can boost compliance, and we need more of it from foreign countries and foreign financial institutions.”
Shulman also said he wants to boost the Qualified Intermediary program, which gives the IRS “an important line of sight into the activities of U.S. taxpayers at foreign banks and financial institutions.”
President Obama’s fiscal 2010 budget includes proposed changes to the QI program to provide increased oversight of taxpayers’ activities at foreign banks, as well as additional information reporting on cross-border wire transfers. The proposals would increase tax withholding in certain situations, strengthen penalties, and shift the burden of proof to make it harder for offshore account-holders to evade U.S. taxes, Shulman added. The proposals would also create disincentives for U.S. taxpayers who chose to do business with a financial institution that has chosen not to be a QI.
On the business tax enforcement side, Shulman acknowledged that many companies adhere to the international tax laws and try hard to comply, but he warned against those that try to take advantage of loopholes.
“Let me be clear,” he said. “There are plenty of international tax strategies that are perfectly legal. And many corporations and their legal and tax advisors are genuinely trying to comply with the myriad of international tax laws. While we won’t always agree about what the law is, or how it applies in particular cases, we recognize that many businesses are trying to get it right. However, we also know that some businesses use the complexity of the Tax Code and the international capital markets to push the envelope too far. That is where we have issues, and where we will continue to focus.”
Particular areas of concern include transfer pricing, financial instruments, hybrid structures and withholding taxes. The administration is also cracking down on reforming the tax deferral rules in which U.S. multinational corporations that invest overseas can take immediate deductions on their U.S. tax returns for certain expenses but defer paying U.S. taxes on the income, Shulman noted.
Another area of corporate tax reform proposed by the administration is to change the so-called “check-the-box” rules that can make foreign subsidiaries “disappear” for U.S. tax purposes, according to Shulman.
The tax man cometh…..
May 5, 2009 by Chinatex
…….and Obama taketh away. Like many of my clients, your company will also be hit by the changes the Obama administration is proposing to the U.S. corporate tax laws. While you should know and understand these changes, there are solutions and they are right here in the Pearl River Delta – Guangdong Province China, Hong Kong and Macau. While business planning generally involves risk, market factors, compliance, labor and other issues, it must also include tax planning and tax strategies for tax avoidance. Old Chinatex helps his clients – those that will listen – legally avoid as much tax as possible. Check out this article below and my comments. As always – Yeehaa!!! Chinatex
Obama to crack down on business taxes
(Agencies)
Updated: 2009-05-04 23:53
WASHINGTON – President Barack Obama plans changes to tax policy certain to be unpopular with corporations with international divisions and individuals who use tax havens. Obama’s two-part plan, which he is slated to unveil at the White House on Monday, also calls for 800 new federal tax agents to enforce the system. New taxes always need new thugs to collect them.
The president’s proposal would eliminate some tax deductions for companies that earn profits in countries with low tax rates, ie: Hong Kong as well as consider US citizens who use tax havens in the Bahamas or Cayman Islands guilty of violating US tax laws. If Obama wins congressional approval for the changes – and he faces a challenge on Capitol Hill – it could deliver $210 billion in tax revenue over the next decade. It always works this way, government overspends and screws up and gets us into such a huge deficit that they have to squeeze us until we bleed.
Officials described the administration’s plan ahead of the announcement on the condition of anonymity so they wouldn’t upstage the president’s remarks. Or so they wouldn’t be dragged out and beaten to death by the pissed off business owners. However, they acknowledged the political challenges facing the plan. The administration won’t seek a complete repeal of overseas tax benefits and, although the rule changes are narrower than some anticipated, business leaders still oppose them as a tax hike. Obama aides countered that the plan is a step toward a massive overhaul of international financial regulations the president has promised. They think we are stupid, so we will just have to find a way to avoid their massive overhaul.
In exchange, Obama said he was willing to make permanent a research tax credit that was to expire at the end of the year and is popular with businesses. Officials estimate that making the tax credits permanent would cost taxpayers $74.5 billion over the next decade. Hmm, take in 210 billion, but leave the 74 billion scraps to the corporations – sounds fair!!
It was small comfort. Companies who shelter profits in international accounts and your companies who are doing business in Asia, stand to lose billions if Obama’s plan becomes law. Under the existing regulation, those companies pay taxes only if they bring the profits back to the US if they keep the profits offshore, they can defer paying taxes indefinitely – and many do. Now they are going to make you claim the monies that you leave in offshore bank accounts. Sound familiar – remember the earlier story i shared with you on the G20 communique. Tax Haven or Heaven?? http://chntxlaw.com/2009/04/tax-heaven-or-haven/
Obama’s plan wouldn’t go into effect until 2011; Obama has said he does not want to tinker with tax revenues until his $787 billion stimulus plan has run its course. He means he doesn’t want to start robbing from Peter to pay for Obama’s spending just yet or he will be run out the country. The proposals, however, were far from complete, and aides said this was just one piece of the administration’s plan for sweeping overhaul.
Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. Obama paying back the labor unions for his massive campaign war chest. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against US companies who keep their entire business operation domestic.
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Unbelievable!! Under Obama’s proposal, Americans would have to prove they were not breaking US tax laws by sending money to banks that don’t cooperate with tax officials. It essentially would reverse the long-held assumption of innocence in US courts. And continue the erosion of our Constitution.
In Labor
April 21, 2009 by Chinatex
I like the lawyer joke that goes: “what do you call a million lawyers at the bottom of the sea?” A good start! It’s not my favorite one or the funniest, but if you want to buy Old Chinatex a beer he’ll tell you the best one. Anyway, check out this article from the China Daily. No need for me to add my comments as i told y’all what would happen as a result of the “new” (now more than a year old) labor law in China. While there are legitimate disputes as a result of the changes to the laws, the reality is there are more hungry lawyers willing to sue employers on behalf of their poor and innocent clients. As Old Chinatex tells his clients, “a foreign company has a snowballs chance in hell of winning in court against a chinese person”. If you would like more info on the labor laws, send me an email info@chntxlaw.com and i will send you the memo i distributed to my clients last year on the labor laws. For now stay out of labor. Yeeha!! Chinatex
Cases soar as workers seek redress
(China Daily) Updated: 2009-04-22 07:53
The number of labor disputes heard by courts has skyrocketed this year with many employees choosing legal avenues before trying to sort out problems with their bosses, experts said on Tuesday. Figures from the Supreme People’s Court (SPC) showed 98,568 cases in the first three months this year, a 59-percent year-on-year rise.
“Amid the global financial crisis, the number of businesses going into the red or going bankrupt continues to grow, leading to more disputes over salary claims,” said Du Wanhua, chief of the SPC’s No 1 civil trials tribunal. “Ever since the implementation of the Labor Contract Law in January 2008, workers have become more aware of their rights and the legal avenues available to safeguard them.”
A revision of regulations on lawsuit fees in 2007 reduced costs to 10 yuan ($1.50) per case, while at some courts they are free. Previously, costs were based on the amount of money involved.
Wang Linqing, a professor of civil law at Renmin University of China, told China Daily that the economic downturn and the revised laws could be putting more pressure on the courts, with some workers filing lawsuits as a first step rather than discussing the issues with their employers.
Wang suggested that more out-of-court mediation be used with extensive participation of government departments, labor unions, residents’ or villagers’ committees as well as mediators. Qiu Baochang, dean of Beijing-based Huijia Law Firm, agreed. “Workers should not rely solely on the courts and arbitration committees. Fair labor treatment can also be achieved through negotiations between workers and enterprises,” Qiu said.
The law, which took effect last year, includes clauses on overtime payment, compensation for contract termination and wages for departing staff who had served at least one year.
Last year, 286,221 disputes were heard, a 93-percent rise on 2007, with the number nearly tripling in some coastal cities.
Courts in Guangdong province heard 20,163 labor disputes during the first three months this year, up 41.6 percent year-on-year, the SPC data showed, while in Jiangsu and Zhejiang provinces the figures jumped 50 and 64 percent to 11,782 and 6,513.
In the past, most disputes were related to damages for injuries or payment, but there has been a sharp rise in workers claiming back pay for social insurance and pensions, as well as lawyers, accountants and auditors suing employers for grievances related to the process of signing, terminating or halting labor contracts
Fearing an increase in disputes might affect social stability, the SPC has been working on a judicial interpretation of the Labor Contract Law since last July to uniform trial standards nationwide. “We encourage enterprises to assume more social responsibility, and try not to lay off workers or reduce salaries. On the other hand, we suggest workers show more understanding toward enterprises in financial difficulties,” Du said. Still, courts will punish such violations as arbitrary retrenchment, and guide employees and enterprises in resolving disputes through shorter working hours, training shifts, temporary vacations or salary negotiations, Du added.
Renminbie
April 14, 2009 by Chinatex
Okay, i know there is no e in Renminbi, which means the people’s money, and not to be confused with OPP. Remember when Vice President Dan Quayle spelled potato with an e, yeah “potatoe”. He was ridiculed for the entire four years he was our illustrious vp and should have provided foresighte for what was to come with GW Bushe. Kind of like how they add an extra e to massage here in the middle kingdom. Being a linguiste, english major and purveyor of fei hua (bullshit for those of you who don’t speak chinese) I often correct them and tell them it is massage, not massagee. No lucke so far. I forgote what this blog poste is about - need more fishee oil. Old Chinatexe told y’all awhile back that companies importing and exporting from Guangdong Province would be allowed to settle transactions in the people’s money (RMB) in Hong Kong. Shhhhh, this means we don’t have to sneake money over the border anymore! Well, who knowse what it really means until the regulationsee are publisheed. Check out the below articlee and the questionable spelling of program (programme) not to be confused with a schemee or pogrom. Must have been written by Dan Quaylee. Yee ha!!! Chinatex.
Tsang set to outline Hong Kong’s role in renminbi clearing scheme
Chief Executive Donald Tsang Yam-kuen is expected to explain Hong Kong’s role in the renminbi clearing scheme today after the State Council yesterday named Shanghai and four cities in Guangdong to take part in the pilot programme.
The State Council approved the scheme, which will allow exporters and importers in Shanghai, Guangzhou, Shenzhen, Zhuhai and Dongguan to settle cross-border trade deals in yuan. A Hong Kong government spokesman said: “We in Hong Kong have completed the necessary technical preparations for becoming the first place outside the mainland to operate the pilot programme. We will work closely with the relevant mainland authorities to ensure a smooth operation of the programme.”
Premier Wen Jiabao had pledged the nation’s support for Hong Kong, saying that plans had been drawn up for renminbi trade settlement in the city, to be implemented as soon as they had received approval from the State Council.
Yesterday, the council – presided over by Mr Wen – urged departments concerned to issue rules relating to the trial scheme as soon as possible. But Xinhua did not release details of the pilot scheme.
Yuan settlement was in accordance with market demand, said Cao Honghui, a researcher with the Institute of Finance under the Chinese Academy of Social Sciences (CASS), but increasing the yuan’s global acceptance would be decided by factors such as the nation’s economic development and improvements to the financial system.
Beijing has been arranging currency swaps with trading partners to bypass the US dollar in trade settlements. CASS economist Zhang Bin said these swaps would guarantee the progress of yuan settlement.
It was announced in December after a State Council meeting that companies in Hong Kong and Macau would be allowed to use yuan to settle trade in goods with partners in Guangdong and the Yangtze River Delta under a pilot programme.
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Paggie Leung SCMP Apr 09, 2009
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Tax Heaven or Haven?
April 4, 2009 by Chinatex
In case y’all were sleeping during the recent G 20 shindig in London, or you were so mesmerized by Barack Obama’s charm and willingness to love everyone, you might not of noticed the biggest thing to come out of the summit. As always, Old Chinatex was not sleeping, and only mesmerized by Sarkozy’s wife – for a few minutes. I was looking out for all of you and that is why I didn’t miss the most important thing – the communique (fancy word for a memorandum of understanding). At the end of the Summit the leaders agree to a bunch of stuff and sign a document on what they agreed to – communique. While the U.S. and EU are spending themselves into irrelevancy, they are also looking for all the tax money they can steal from their citizens and have been bullying other countries into releasing confidential data on their citizens bank accounts – so they can legally take the money. Looks like China would not be bullied. Read the below articles and you’ll see what Old Chinatex found so important. Hope you all are able to avoid as much taxes as possible. Yeeha!! Chinatex
Leaders see end to banking secrecy
By Alex Barker and Vanessa Houlder in London and Jamil Anderlini in Beijing
Published: April 2 2009 19:56 | Last updated: April 2 2009 19:56
Leaders of the G20 nations on Thursday declared that “the era of banking secrecy is over”, Maybe not just yet!! calling for the immediate publication of a list of countries that fell short of international standards. A blacklist of countries that were unwilling to co-operate on information sharing ran to six countries as talks began on Thursday. But the threat of being named convinced Brunei, Guatemala and Malaysia to agree to begin implementing reforms. This left Costa Rica, the Philippines and Uruguay to be “named and shamed” on a list, expected to be published by the Paris-based OECD.
The politicians threatened to take action against “non-co-operative jurisdictions, including tax havens”, asking the OECD to report back by November’s meeting of finance ministers in Scotland. They said: “We stand ready to deploy sanctions to protect our public finances and financial systems so that we can steal money from our own citizens to pay for our incompetence.”
The blacklist is likely to prove highly controversial although most of the offshore financial centres that have been the target of criticism are contained in a second list. This names about 38 countries that have promised greater transparency but not yet signed agreements, ranging from countries such as Panama that apparently committed to greater transparency years ago to jurisdictions such as Singapore and Switzerland, which have only recently announced plans to become more ttransparent.
A lawyer dismissed the mooted blacklist as a “face-saving exercise, with mainly inconsequential players.” Maybe, but it is the small crack in the wall that the thieves in government will use to drive a wedge and open up the coffers.
President Nicolas Sarkozy of France who pushed hard for the blacklist said the results of the summit were “beyond what we could have imagined . . . We are all happy with the results.” Not so happy indeed because you don’t have the power or leverage to make China bend to your pressure and you never will. See the article below if you want to know how happy Sarkozy was. Seems the U.S. president had to bail them out once again.
US officials said that Barack Obama had helped broker a compromise over offshore centres between Hu Jintao, China’s president, and Mr Sarkozy, who had threatened to walk away from the summit. The politicians faced difficulty in finding objective criteria to single out jurisdictions that do not currently exchange tax information, given the insistence from China that Hong Kong was not targeted and the resistance of European Union members to putting European countries on the list.
For an hour, Mr Sarkozy and Mr Hu argued about tax havens, US and European sources in the conference room said. Mr Sarkozy wanted the final G20 communique to endorse a list of global tax havens – maybe even including Hong Kong and Macau. The sources said Mr Hu appeared angry that Mr Sarkozy was effectively accusing China of lax regulation, and that the French leader was asking China to endorse sanctions issued by the Organisation for Economic Co-operation and Development, a club of wealthy nationsBeijing
has yet to join. The G20 gave the OECD the task of compiling the list of tax havens.
Accounts from White House officials, corroborated by European and other officials also in the room, said Mr Obama escorted both men, one at a time, to a corner of the room. “Let’s get this all in some kind of perspective, guys,” he said. He tapped Mr Sarkozy on the shoulder and, along with each man’s economic adviser and translator, suggested a change. How about replacing the word “recognise”, Mr Obama suggested, with the word “note”?
When Mr Sarkozy concurred, Mr Obama invited Mr Hu to the corner and asked what he thought. Within an hour, the other participants looked over to see Mr Obama, Mr Sarkozy and Mr Hu sealing the agreement with handshakes. The haggling had continued until five minutes before the summit closed. Oh, that Barack Obama, what a great guy!! I am so happy that now Americans are loved all over the world again and I don’t have to call myself a Canadian anymore.
In the end, Hong Kong and Macau did not even appear on the list of tax havens. Instead, they were referred to in the form of a notation, which said China’s special administrative regions had only “committed to implement” the appropriate tax standards, although they had yet to substantially do so. This is the important part and good for all of us doing business in Asia
On the labor front
February 10, 2009 by Chinatex
This just in from the central government. Looks like it will need some clarification which we may or may not receive. If you have more than 20 employees or will lay off more than 10% of your staff, you should know about this new regulation. Remember that it isn’t always about getting on the wrong side of laws and regulations that are not very clear, it can also be about being in the crosshairs of a new breed of hungry Chinese lawyers. Be careful out there. Yeeha Chinatex!
Companies to inform govt of layoffs 30 days prior
By Chen Jia (China Daily) February 11, 2009
http://www.chinadaily.com.cn/bizchina/2009-02/11/content_7463470.htm
As layoffs and labor disputes become frequent with the global economic slowdown wiping out more businesses, the central government yesterday told employers to inform trade unions of their plans of mass layoffs at least 30 days in advance.
If a company plans to layoff more than 20 employees, or over 10 percent of the total staff in one go, it must submit written reports to the local labor and social security department 30 days prior to the action, the State Council said in a statement issued on its official website (www.gov.cn) yesterday.
The State Council emphasized that priority should be given to ensure the legal rights of the employees. Priority should be given to ensure the legal rights of employees!
Moreover, employers should not does this mean have to? refuse to pay for social insurance as long as the working relations still exist, it said.
Local labor officials should keep a watch on such companies to ensure employers do not flee or postpone wages and insurance payment, it said.
Mo Rong, deputy chief of the labor science research institute under the Ministry of Human Resources and Social Security, said stable employment should be the top priority under the current financial circumstances.”In the long term, mass layoffs are not good for the development of an enterprise,” he said.
The government has launched a series of favorable policies “to either reduce or postpone five types of social security insurance fees to give private enterprises some relief”, he added.
“The State Council’s notice reiterated the regulation of Labor Law, and it is a good reminder to both enterprises and employers,” Li Kui, a lawyer of the Beijing-based Yingke Law Firm, told China Daily.
“But I hope the regulation would be further clarified, as different scales of companies and official organizations that manage layoffs need to be more clear,” he said.
Meng Qinghuan, an employer of a Beijing-based fund management company, said he was doubtful if the new regulation would be implemented successfully.
“Some small enterprises have no ability to anticipate the crisis and go bankrupt overnight,” he said.
