IRS, CANADA FIGHT BORDER TAX SCHEMEWASHINGTON - Officials of the Canada Revenue Agency and the U.S. Internal Revenue Service announced progress in unraveling an abusive cross-border tax scheme. The scheme - involving hundreds of taxpayers and tens of millions of dollars in improper deductions and unreported income from retirement account withdrawals - was unearthed through leads developed through the agencies' Joint International Tax Shelter Information Centre.
Promoters from both countries have reportedly been marketing the scheme to individual investors. Middle- to high-income individuals purchased what appear to be high-yield offshore investments through offshore corporations and foreign bank accounts, usually using cash or proceeds from withdrawals, allegedly tax free, of retirement funds. Investors also make purchases using tax refunds improperly generated by alleged losses claimed for natural resource industry investments.
CRA and IRS agents are continuing to identify and prosecute promoters, participants and entities involved in the scheme.
SEC WON'T APPEAL HEDGE RULING
WASHINGTON - The Securities and Exchange Commission won't challenge a federal appeals court ruling overturning independence rules for hedge fund directors. The June ruling, from a three-judge U.S. Court of Appeals panel, unanimously struck down the SEC's hedge fund advisor registration rules, made under the Investment Advisers Act. In a statement, Chairman Christopher Cox said that the decision not to appeal further was made for a number of reasons - noting that the ruling was based on multiple grounds and was unanimous.
"The commission is moving aggressively on an agenda of rulemaking and staff guidance ... to address the legal consequences from the invalidation of the rule," Cox said.
The SEC is expected to introduce a new anti-fraud rule under the act that Cox said would have the effect of "looking through" a hedge fund to its investors.
IRS OK WITH CASINO COMPS DEDUCTION
WASHINGTON - Agents won't be allowed to challenge whether casino comps to high-rolling patrons qualify for treatment as promotional expenses, according to a memo released by the Large and Mid-Size Business Division of the Internal Revenue Service. Casinos have usually marketed their comp programs in such a way that the costs are treated as promotional expenses - being given to gamblers based on a casino's expected win calculated from the gambler's prior activity.
"Unless the manner in which a casino awards comps to its patrons differs markedly from the method described [in the memo], agents are directed not to challenge whether the comps qualify for treatment as promotional expenses," the memo said. "This directive is intended to conserve examination resources."
IIA FORMS CANADIAN COUNCIL
ALTAMONTE SPRINGS, FLA. - The Institute of Internal Auditors has established a Canadian Council, a group of 18 members from throughout the country, to address issues specific to the region's internal auditors. Additionally, the IIA announced that it will establish a Canadian office with an executive director.
The council will work to enhance advocacy initiatives with groups that impact the internal audit profession in Canada, such as the federal and provincial governments, corporate directors, and the securities commissions. It will also work to develop standards and other professional guidance - such as materials and training on internal auditors' role in compliance with Canadian Securities Administrators requirements.
The IIA has over 124,000 members in 165 countries - including 11 chapters and over 5,000 members in Canada. Its membership has increased 64 percent in the past five years, and Canada has seen its own chapters grow by 22 percent since 2004.
