GAO GIVES GOOD MARKS TO IRS APPEALS OFFICE: The Government Accountability Office offered some recommendations aimed at upping efficiency, but said that the Internal Revenue Service Office of Appeals has been doing a good job handling its process for collection due process appeals.Under the IRS Restructuring and Reform Act of 1998, taxpayers facing liens or levies can request a collection due process appeal hearing with the IRS office. By 2005, those cases represented about a quarter of the office's workload.
After analyzing 208 cases closed during the 2004 fiscal year, the GAO recommended that the IRS require taxpayers seeking a collection alternative to submit additional information with their hearing requests. The IRS disagreed, and the suggestion has now been forwarded to Congress for action. The GAO also asked Congress to consider removing some taxpayer categories from eligibility for the process if those taxpayers' inclusion "is not consistent with the goal of ensuring due process."
The GAO estimated that the IRS did not follow proper procedures in 2 percent of collection due process cases closed during 2004. About 27 percent of taxpayers received a different outcome than the lien filing or levy after appealing, including those that negotiated collection alternatives, or ended up with no balance due to the IRS. For about 60 percent of taxpayers, appeals often upheld the collection action because taxpayers did not file all the required tax returns necessary to qualify for a collection alternative. An estimated 5 percent of taxpayers raised frivolous arguments.
The report is available at www.gao.gov/new.items/d07112.pdf.
KPMG STUDY FINDS LOW CORPORATE TAXES HAVE SHORT-TERM BENEFITS: New research covering 86 countries has confirmed that while low corporate tax rates can help give a country a significant competitive advantage over economic rivals, the advantage tends to be short-term.
The study by KPMG International did say that while low rates are connected with higher-than-average economic growth, the rates should be backed up with a solid legal and economic infrastructure and targeted incentives if countries are to attract long-term private-sector investment.
The study looked at international movements in corporate tax rates over the past 14 years, drawing on the annual surveys that the organization conducts.
The findings point to economic growth enjoyed over this period by countries such as Ireland, Norway, Sweden and Denmark, and draws a parallel between this success and a favorable corporate tax regime. The latter trio enjoyed high growth rates while cutting corporate tax. The main exception to this trend is the U.S., which has maintained high levels of growth with a consistently high corporate tax rate of 40 percent.
"Once a major industrialized economy cuts its rates, others seem compelled to do the same, in a process of international tax competition that continues and intensifies over time," said U.K. firm partner Loughlin Hickey, the head of KPMG's global tax practice, in a statement. "But given the intense global competition for tax revenue, it may make sense for governments to follow the example of the commercial sector and consider strategies other than simple price cuts to attract customers. It does not have to be a race to the bottom."
The full report is available at http://www.kpmg.com/services/tax/intcorp/ctr/.
CANADIAN STOCKS FALL, RISE AFTER TRUST TAX PROPOSAL: Following a drastic fall in early November, Canadian stock exchange shares have risen as buyers came back into the market the day after a government proposal to change the tax treatment of income trusts.
About 10 percent of the members of the country's benchmark stock index are among the securities classification targeted by the proposal. Under the proposal, the Canadian government would impose a distribution tax on payouts by income trusts, taking effect next year for newly formed trusts, while existing trusts receive a four-year transition period.
Finance Minister Jim Flaherty announced the proposed tax-law change, arguing that it is needed to close a loophole that results in the Canadian government missing out on millions in corporate tax revenue. The trusts largely bypass company taxes and pay out the bulk of their cash directly to investors.
The motion before Parliament would allow the government to collect a tax on income trusts - many of them in the oil and gas industry - until formal legislation amends the tax laws.
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