Top Bush Official says Fix Tax Code to Avoid Europe Trade War: The Bush administration sent its big guns to Congress in July to urge legislators to fix part of the tax code to avoid a U.S.-European Union trade war.

The sticking point is the “foreign sales corporation” tax program, which allows U.S. companies that do business overseas to shield between 15 percent and 30 percent of their export income from U.S. taxes. This adds up to an annual break of nearly $5 billion for U.S. firms. In 2001, the World Trade Organization ruled the measure an illegal subsidy, and authorized the EU to impose $4 billion in sanctions on U.S. goods and services.

“I suspect that if, by the end of the session, we have not shown serious progress in passing legislation to replace [the tax laws that violate international trade rules], I think that next January we face a very high likelihood of retaliation,” said John Veroneau, general counsel in the Office of the U.S. Trade Representative, in testimony before the Senate Finance Committee, according to a report on

Veroneau said that the EU has held off due to a promise from the U.S. to fix the tax code problem, and because it realizes that such sanctions would also hurt its own consumers.

IRS Names Babers New Chief Human Capital Officer: The Internal Revenue Service has appointed Beverly Ortega Babers as its new chief human capital officer. In this new position, Babers will report to John Dalrymple, deputy commissioner for operations support. Federal law requires executive departments and agencies to name or appoint a senior official to be the agency’s chief human capital officer.

Currently, Babers is the director of technical services in the IRS Appeals Division, overseeing tax policy and procedure, technical guidance and processing services functions within Appeals. She joined the IRS in 1999 as an assistant to the commissioner, providing advice on tax policy and tax administration matters. Before coming to the IRS, Babers was chief of staff and counsel to the assistant attorney general of the Tax Division of the Department of Justice, where she made recommendations for appellate and litigation strategy and oversaw administrative functions.

IRS says E-Filing’s Better Now: Practitioners - the Internal Revenue Service feels your pain about e-filing, and says your complaints are being resolved.

During the July “Tax Talk Today” Webcast, IRS strategic services director Jo Ann Bass assured tax professionals that technical glitches have been ironed out, and that it should be smooth sailing from here on. “We’re responding to tax professionals, because we know how important it is for them to make their offices as all-electronic as possible,” Bass said. She added that the agency will be visiting with firms across the country, asking what more it can do to “bring them into” e-filing.

Kevin Belden, an associate partner at IBM Strategic Consulting Services, said that for the agency to reach its e-filing goal - 80 percent of all 1040s by 2007 - it has to win over more business filers. He chairs the IRS Electronic Tax Administration Advisory Committee, and said that the committee will urge Congress that “the business case must be made for both practitioners and small business owners. E-filing has to make sense from a business perspective.”

Nation’s Smallest Businesses Pessimistic, Blame Tax Laws: Over the past year, the owners of the nation’s smallest businesses have become increasingly pessimistic about the economy and their businesses - and think that the government’s tax laws are partly to blame.

A study by the National Association for the Self-Employed found deep dissatisfaction with the federal “self-employment tax” on health insurance, and called for reforms to remove penalties for the nation’s 16 million smallest enterprises.

“The businesses that can least afford it are paying disproportionately more for taxes in key areas,” said NASE president Robert Hughes. “Finding solutions that provide a fairer shake for these enterprises is in the best interests of the nation.”

According to the “Self-Employed and the Economy” survey, the number of micro-business owners who say that they feel optimistic about conditions for business has fallen from nearly half (49 percent) in 2002 to less than a third (31.1 percent) in late May 2003. Uncertainty about the future of their enterprises has nearly doubled among owners in the same period.

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