Where Not To Die In 2022: The Greediest Death Tax States

Should death be taxing? Amid budget surpluses, states started slashing income taxes last year. But only two have made significant changes to their estate or inheritance taxes so far. Last year Iowa legislators decided to phase out the state’s inheritance tax by January 1, 2025. And this year Nebraska legislators made pro-taxpayer tweaks to its inheritance tax for deaths occurring on or after January 1, 2023.

Other jurisdictions have lessened the tax bite for dying in 2022—through previously scheduled changes or inflation adjustments. But some, without inflation adjustments, are still taxing estates at levels that haven’t budged for years, meaning more families are getting surprise death tax bills. In one of those states—Massachusetts—Democratic legislators are pushing for changes to spare more estates from the tax as part of a broader tax reform package this summer.

In all, 17 states and the District of Columbia levy estate and/or inheritance taxes. Maryland is the outlier that levies both. If you live in one of these states—or might retire to one—pay attention.

These taxes operate separately from the federal estate tax, which applies only to a couple thousand estates a year valued at over $12.06 million per person. (That number is set to drop roughly in half on January 1, 2026, when the Trump tax cuts that temporarily doubled the base exemption from $5 million to $10 million expire.) While few individuals need to plan around the federal estate tax, the state levies all kick in at much lower dollar levels, often making it a middle class problem.

Consider the current state estate tax in Massachusetts. The $1 million estate tax exemption hasn’t been adjusted for inflation since 2006, so it can hit the heirs of middle class folks who have seen their houses and retirement accounts appreciate.

“You can be real estate rich with a modest home, and your estate could be subject to this,” says Scott Cashman, a tax manager with Bowditch & Dewey in Worcester, Massachusetts. “It’s becoming more of an issue every year.” If the $1 million exemption amount set in 2006 had been adjusted for inflation, it would be closer to $1.5 million today.

Say a widow or widower died with a house worth $535,000, a $200,000 bank account, a $350,000 retirement account, and a $15,000 car, for a $1.1 million gross estate. Assuming $50,000 in deductions, the estate tax would be $20,500, he calculates.

(There’s no estate tax when assets are left to a spouse, but in this case the heirs are children.) If the house is worth $1 million, however, the tax would be $65,360— one third of the cash in the bank. Adding to the pain is what’s known as the cliff: Once the $1 million mark is crossed, the estate tax applies to everything over $40,000. “I don’t know if most legislators understand that,” he says.

A bill introduced by Democratic state senators would double the Massachusetts exemption amount to $2 million and only levy tax above that amount, removing the dreaded cliff. “We have such a surplus now, this is the time to do it,” says Cashman. “There’s broad-based support for reform.”

Inheritance taxes—levied in 6 states—can kick in at far lower levels, with the exemption and tax rate depending on the heir’s relationship to the deceased. In New Jersey, for example, if you leave your estate to a Class D beneficiary—including a nephew or non-civil-union partner—they’re taxed at 15% on assets up to $700,000 and 16% on assets above $700,000.

In Nebraska, lawmakers this year fell short of inheritance tax repeal but succeeded in chipping away at the state’s inheritance tax. The new law, effective Jan. 1, 2023, cuts the top tax rates (from 18% to 15%, for example) and increases the exemption amounts (from $10,000 to $25,000, for example). It also eliminates inheritance taxes for heirs under 22, and it makes unadopted step-relatives taxed at the lower rate for nearer family members and not the higher rate for unrelated heirs.

“Lawmakers wouldn’t agree to a general phase-down of the tax at this point that would apply to everyone, but they were willing to accept that if a younger person were to inherit property or cash (and we can use a lot more young residents and entrepreneurs in Nebraska) that it’s not in the state’s economic interest to take any of it away from them,” says Adam Weinberg, communications director with the Platte Institute, which is continuing its effort to repeal the inheritance tax in Nebraska.

Meanwhile, Connecticut, the least taxing of the estate tax states, is on schedule to increase its exemption to $9.1 million in 2022, and then to match the federal exemption for deaths on or after January 1, 2023. In an unusual nod designed to keep the richest taxpayers in the state, Connecticut has a $15 million cap on state estate and gift taxes (which represents the tax due on an estate of approximately $129 million).

Other states with 2022 changes: Washington, D.C. reduced its estate tax exemption amount to $4 million in 2021, but then adjusted that amount for inflation beginning this year, bringing the 2022 exemption amount to $4,254,800. Several states, which all have set their exemption amounts at different base levels, also see inflation adjustments for 2022. Maine’s is $6,010,000, while New York’s is $6,110,000. In Rhode Island, the 2022 exemption amount is $1,648,611.

I cover personal finance, with a focus on retirement planning, trusts and estates strategies, and taxwise charitable giving. I’ve written for Forbes since 1997.

Source: Where Not To Die In 2022: The Greediest Death Tax States

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Fighting Identity Theft With The Red Flags Rule

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An estimated nine million Americans have their identities stolen each year. Identity thieves may drain accounts, damage credit, and even put medical treatment at risk. The cost to business — left with unpaid bills racked up by scam artists — can be staggering, too.

The Red Flags Rule1 requires many businesses and organizations to implement a written identity theft prevention program designed to detect the “red flags” of identity theft in their day-to-day operations, take steps to prevent the crime, and mitigate its damage. The bottom line is that a program can help businesses spot suspicious patterns and prevent the costly consequences of identity theft.

The Federal Trade Commission (FTC) enforces the Red Flags Rule with several other agencies. This article has tips for organizations under FTC jurisdiction to determine whether they need to design an identity theft prevention program.

An Overview

The Red Flags Rule tells you how to develop, implement, and administer an identity theft prevention program. A program must include four basic elements that create a framework to deal with the threat of identity theft.2

  1. A program must include reasonable policies and procedures to identify the red flags of identity theft that may occur in your day-to-day operations. Red Flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft.3 For example, if a customer has to provide some form of identification to open an account with your company, an ID that doesn’t look genuine is a “red flag” for your business.
  2. A program must be designed to detect the red flags you’ve identified. If you have identified fake IDs as a red flag, for example, you must have procedures to detect possible fake, forged, or altered identification.
  3. A program must spell out appropriate actions you’ll take take when you detect red flags.
  4. A program must detail how you’ll keep it current to reflect new threats.

Just getting something down on paper won’t reduce the risk of identity theft. That’s why the Red Flags Rule has requirements on how to incorporate your program into the daily operations of your business. Fortunately, the Rule also gives you the flexibility to design a program appropriate for your company — its size and potential risks of identity theft. While some businesses and organizations may need a comprehensive program to address a high risk of identity theft, a streamlined program may be appropriate for businesses facing a low risk.

Securing the data you collect and maintain about customers is important in reducing identity theft. The Red Flags Rule seeks to prevent identity theft, too, by ensuring that your business or organization is on the lookout for the signs that a crook is using someone else’s information, typically to get products or services from you without paying for them.

That’s why it’s important to use a one-two punch in the battle against identity theft: implement data security practices that make it harder for crooks to get access to the personal information they use to open or access accounts, and pay attention to the red flags that suggest that fraud may be afoot.

Who Must Comply with the Red Flags Rule: A Two-Part Analysis

The Red Flags Rule requires “financial institutions” and some “creditors” to conduct a periodic risk assessment to determine if they have “covered accounts.” The determination isn’t based on the industry or sector, but rather on whether a business’ activities fall within the relevant definitions. A business must implement a written program only if it has covered accounts.

Financial Institution

The Red Flags Rule defines a “financial institution” as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or a person that, directly or indirectly, holds a transaction account belonging to a consumer.4 While many financial institutions are under the jurisdiction of the federal bank regulatory agencies or other federal agencies, state-chartered credit unions are one category of financial institution under the FTC’s jurisdiction.

Creditor

The Red Flags Rule defines “creditor” based on conduct.5

To determine if your business is a creditor under the Red Flags Rule, ask these questions:

Does my business or organization regularly:

  • defer payment for goods and services or bill customers?
  • grant or arrange credit?
  • participate in the decision to extend, renew, or set the terms of credit?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, ask:

Does my business or organization regularly and in the ordinary course of business:

  • get or use consumer reports in connection with a credit transaction?
  • give information to credit reporting companies in connection with a credit transaction?
  • advance funds to — or for — someone who must repay them, either with funds or pledged property (excluding incidental expenses in connection with the services you provide to them)?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, you are a creditor covered by the Rule.

Covered Accounts

If you conclude that your business or organization is a financial institution or a creditor covered by the Rule, you must determine if you have any “covered accounts,” as the Red Flags Rule defines that term. You’ll need to look at existing accounts and new ones6.  Two categories of accounts are covered:

  1. A consumer account for your customers for personal, family, or household purposes that involves or allows multiple payments or transactions.7 Examples are credit card accounts, mortgage loans, automobile loans, checking accounts, and savings accounts.
  2.  “Any other account that a financial institution or creditor offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the financial institution or creditor from identity theft, including financial, operational, compliance, reputation, or litigation risks.”8 Examples include small business accounts, sole proprietorship accounts, or single transaction consumer accounts that may be vulnerable to identity theft. Unlike consumer accounts designed to allow multiple payments or transactions — always considered “covered accounts” under the Rule — other types of accounts are “covered” only if the risk of identity theft is reasonably foreseeable.

In determining if accounts are covered under the second category, consider how they’re opened and accessed. For example, there may be a reasonably foreseeable risk of identity theft in connection with business accounts that can be accessed remotely — say, through the Internet or the telephone. Your risk analysis must consider any actual incidents of identity theft involving accounts like these.

If you don’t have any covered accounts, you don’t need a written program. But business models and services change. You may acquire covered accounts through changes to your business structure, process, or organization. That’s why it’s good policy and practice to conduct a periodic risk assessment.

FAQs

  1. I review credit reports to screen job applicants. Does the Rule apply to my business on this basis alone? No, the Rule does not apply because the use is not “in connection with a credit transaction.”
  2. What if I occasionally get credit reports in connection with credit transactions?According to the Rule, these activities must be done “regularly and in the ordinary course of business.” Isolated conduct does not trigger application of the Rule, but if your business regularly furnishes delinquent account information to a consumer reporting company but no other credit information, that satisfies the “regularly and in the ordinary course of business” prerequisite.What is deemed “regularly and in the ordinary course of business” is specific to individual companies. If you get consumer reports or furnish information to a consumer reporting company regularly and in the ordinary course of your particular business, the Rule applies, even if for others in your industry it isn’t a regular practice or part of the ordinary course of business.
  3. I am a professional who bills my clients for services at the end of the month. Am I a creditor just because I allow clients to pay later?No. Deferring payment for goods or services, payment of debt, or the purchase of property or services alone doesn’t constitute “advancing funds” under the Rule.
  4. In my business, I lend money to customers for their purchases. The loans are backed by title to their car. Is this considered “advancing funds”?Yes. Anyone who lends money — like a payday lender or automobile title lender — is covered by the Rule. Their lending activities may make their business attractive targets for identity theft. But deferring the payment of debt or the purchase of property or services alone doesn’t constitute “advancing funds.”
  5. I offer instant credit to my customers and contract with another company to pull credit reports to determine their creditworthiness. No one in our organization ever sees the credit reports. Is my business covered by the Rule?Yes. Your business is — regularly and in the ordinary course of business — using credit reports in connection with a credit transaction. The Rule applies whether your business uses the reports directly or whether a third-party evaluates them for you.
  6. I operate a finance company that helps people buy furniture. Does the Rule apply to my business?Yes. Your company’s financing agreements are considered to be “advancing funds on behalf of a person.”
  7. In my legal practice, I often make copies and pay filing, court, or expert fees for my clients. Am I “advancing funds”?No. This is not the same as a commercial lender making a loan; “advancing funds” does not include paying in advance for fees, materials, or services that are incidental to providing another service that someone requested.
  8. Our company is a “creditor” under the Rule and we have credit and non-credit accounts. Do we have to determine if both types of accounts are “covered accounts”? Yes. You must examine all your accounts to determine which are “covered accounts” that must be included in your written identity theft prevention program.
  9. My business accepts credit cards for payments. Are we covered by the Red Flags Rule on this basis alone?No. Just accepting credit cards as a form of payment does not make you a “creditor” under the Red Flags Rule.
  10. My business isn’t subject to much of a risk that a crook is going to misuse someone’s identity to steal from me, but it does have covered accounts. How should I structure my program?If identity theft isn’t a big risk in your business, complying with the Rule is simple and straightforward. For example, if the risk of identity theft is low, your program might focus on how to respond if you are notified — say, by a customer or a law enforcement officer — that someone’s identity was misused at your business. The Guidelines to the Rule have examples of possible responses. But even a business at low risk needs a written program that is approved either by its board of directors or an appropriate senior employee.

How To Comply: A Four-Step Process

Many companies already have plans and policies to combat identity theft and related fraud. If that’s the case for your business, you’re already on your way to full compliance.

1. Identify Relevant Red Flags

What are “red flags”? They’re the potential patterns, practices, or specific activities indicating the possibility of identity theft.9 Consider:

Risk Factors. Different types of accounts pose different kinds of risk. For example, red flags for deposit accounts may differ from red flags for credit accounts, and those for consumer accounts may differ from those for business accounts. When you are identifying key red flags, think about the types of accounts you offer or maintain; the ways you open covered accounts; how you provide access to those accounts; and what you know about identity theft in your business.

Sources of Red Flags. Consider other sources of information, including the experience of other members of your industry. Technology and criminal techniques change constantly, so it’s important to keep up-to-date on new threats.

Categories of Common Red Flags. Supplement A to the Red Flags Rule lists specific categories of warning signs to consider including in your program. The examples here are one way to think about relevant red flags in the context of your own business.

  • Alerts, Notifications, and Warnings from a Credit Reporting Company. Changes in a credit report or a consumer’s credit activity might signal identity theft:
    • a fraud or active duty alert on a credit report
    • a notice of credit freeze in response to a request for a credit report
    • a notice of address discrepancy provided by a credit reporting company
    • a credit report indicating a pattern inconsistent with the person’s history B for example, an increase in the volume of inquiries or the use of credit, especially on new accounts; an unusual number of recently established credit relationships; or an account that was closed because of an abuse of account privileges
  • Suspicious Documents. Documents can offer hints of identity theft:
    • identification looks altered or forged
    • the person presenting the identification doesn’t look like the photo or match the physical description
    • information on the identification differs from what the person with identification is telling you or doesn’t match a signature card or recent check
    • an application looks like it’s been altered, forged, or torn up and reassembled
  • Personal Identifying Information. Personal identifying information can indicate identity theft:
    • inconsistencies with what you know — for example, an address that doesn’t match the credit report or the use of a Social Security number that’s listed on the Social Security Administration Death Master File
    • inconsistencies in the information a customer has submitted to you
    • an address, phone number, or other personal information already used on an account you know to be fraudulent
    • a bogus address, an address for a mail drop or prison, a phone number that’s invalid, or one that’s associated with a pager or answering service
    • a Social Security number used by someone else opening an account
    • an address or telephone number used by several people opening accounts
    • a person who omits required information on an application and doesn’t respond to notices that the application is incomplete
    • a person who can’t provide authenticating information beyond what’s generally available from a wallet or credit report — for example, someone who can’t answer a challenge question
  • Account Activity. How the account is being used can be a tip-off to identity theft:
    • shortly after you’re notified of a change of address, you’re asked for new or additional credit cards, or to add users to the account
    • a new account used in ways associated with fraud — for example, the customer doesn’t make the first payment, or makes only an initial payment; or most of the available credit is used for cash advances or for jewelry, electronics, or other merchandise easily convertible to cash
    • an account used outside of established patterns — for example, nonpayment when there’s no history of missed payments, a big increase in the use of available credit, or a major change in buying or spending patterns or electronic fund transfers
    • an account that is inactive is used again
    • mail sent to the customer that is returned repeatedly as undeliverable although transactions continue to be conducted on the account
    • information that the customer isn’t receiving an account statement by mail or email
    • information about unauthorized charges on the account
  • Notice from Other Sources. A customer, a victim of identity theft, a law enforcement authority, or someone else may be trying to tell you that an account has been opened or used fraudulently.

2. Detect Red Flags

Sometimes, using identity verification and authentication methods can help you detect red flags. Consider whether your procedures should differ if an identity verification or authentication is taking place in person, by telephone, mail, or online.

  • New accounts. When verifying the identity of the person who is opening a new account, reasonable procedures may include getting a name, address, and identification number and, for in-person verification, checking a current government-issued identification card, like a driver’s license or passport.
  • Depending on the circumstances, you may want to compare that to information you can find out from other sources, like a credit reporting company or data broker, or the Social Security Number Death Master File.10 Asking questions based on information from other sources can be a helpful way to verify someone’s identity.
  • Existing accounts. To detect red flags for existing accounts, your program may include reasonable procedures to confirm the identity of the person you’re dealing with, to monitor transactions, and to verify the validity of change-of-address requests. For online authentication, consider the Federal Financial Institutions Examination Council’s guidance on authentication as a starting point.11
  • It explores the application of multi-factor authentication techniques in high-risk environments, including using passwords, PINs, smart cards, tokens, and biometric identification. Certain types of personal information — like a Social Security number, date of birth, mother’s maiden name, or mailing address — are not reliable authenticators because they’re so easily accessible.

You may be using programs to monitor transactions, identify behavior that indicates the possibility of fraud and identity theft, or validate changes of address. If so, incorporate these tools into your program.

3. Prevent And Mitigate Identity Theft

When you spot a red flag, be prepared to respond appropriately. Your response will depend on the degree of risk posed. It may need to accommodate other legal obligations, like laws about providing and terminating service.

The Guidelines in the Red Flags Rule offer examples of some appropriate responses, including:

  • monitoring a covered account for evidence of identity theft
  • contacting the customer
  • changing passwords, security codes, or other ways to access a covered account
  • closing an existing account
  • reopening an account with a new account number
  • not opening a new account
  • not trying to collect on an account or not selling an account to a debt collector
  • notifying law enforcement
  • determining that no response is warranted under the particular circumstances

The facts of a particular case may warrant using one of these options, several of them, or another response altogether. Consider whether any aggravating factors raise the risk of identity theft. For example, a recent breach that resulted in unauthorized access to a customer’s account records would call for a stepped-up response because the risk of identity theft rises, too.

4. Update The Program

The Rule recognizes that new red flags emerge as technology changes or identity thieves change their tactics, and requires periodic updates to your program. Factor in your own experience with identity theft; changes in how identity thieves operate; new methods to detect, prevent, and mitigate identity theft; changes in the accounts you offer; and changes in your business, like mergers, acquisitions, alliances, joint ventures, and arrangements with service providers.

Administering Your Program

Your Board of Directors — or an appropriate committee of the Board — must approve your initial plan.  If you don’t have a board, someone in senior management must approve it.  The Board may oversee, develop, implement, and administer the program — or it may designate a senior employee to do the job. Responsibilities include assigning specific responsibility for the program’s implementation, reviewing staff reports about compliance with the Rule, and approving important changes to your program.

The Rule requires that you train relevant staff only as “necessary.” Staff who have taken fraud prevention training may not need to be re-trained. Remember that employees at many levels of your organization can play a key role in identity theft deterrence and detection.

In administering your program, monitor the activities of your service providers. If they’re conducting activities covered by the Rule — for example, opening or managing accounts, billing customers, providing customer service, or collecting debts — they must apply the same standards you would if you were performing the tasks yourself. One way to make sure your service providers are taking reasonable steps is to add a provision to your contracts that they have procedures in place to detect red flags and either report them to you or respond appropriately to prevent or mitigate the crime. Other ways to monitor your service providers include giving them a copy of your program, reviewing the red flag policies, or requiring periodic reports about red flags they have detected and their response.

It’s likely that service providers offer the same services to a number of client companies. As a result, the Guidelines are flexible about service providers using their own programs as long as they meet the requirements of the Rule.

The person responsible for your program should report at least annually to your Board of Directors or a designated senior manager. The report should evaluate how effective your program has been in addressing the risk of identity theft; how you’re monitoring the practices of your service providers; significant incidents of identity theft and your response; and recommendations for major changes to the program.12

Source: Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business | Federal Trade Commission

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Binance Forges Links In The Gulf As It Seeks Fixed Base

Crypto-trading platform’s lack of formal headquarters has added to regulators’ concerns. Binance, the world’s largest cryptocurrency exchange, is setting down roots in the Gulf as it seeks to placate global regulators by establishing a fixed home base and regulatory ties for its international business.

The group this week announced that it had secured cryptoasset licences from both Dubai and Bahrain, as it moves away from portraying itself as a decentralised organisation with no fixed headquarters. Binance’s decision to seek a more traditional structure — with regional offices, headquarters and key regulatory links — marks a big concession to sustained pressure from financial watchdogs around the world.

Binance chief executive Changpeng Zhao described the licence from Bahrain as “a milestone in our journey to being fully licensed and regulated around the world” and praised Dubai for its “unique operating model” for the crypto industry. The green light from Bahrain on Monday marked the first big regulatory relationship for Binance’s global business.

Local units in the group’s sprawling web of corporate entities have applied for supervision or based key operations in several countries including the UK, Singapore, Lithuania and Malta, but the international business — which is registered in the Cayman Islands — has resisted being tied to a particular jurisdiction.

Binance said the cryptoasset license, the first such permit issued by Bahrain, would allow the company to provide cryptoasset trading, custodial services and portfolio management to customers. The company on Wednesday said it had been granted a virtual asset license by a new Dubai virtual asset regulator, enabling it to operate within the emirate’s “test-adapt-scale” model as a base for regional expansion.

The Dubai permissions will allow Binance to extend limited exchange products to pre-qualified investors and professional financial service providers. The firm will also locate a “blockchain technology hub” in the Dubai World Trade Centre. Weekly newsletter For the latest news and views on fintech from the FT’s network of correspondents around the world. But the exchange’s search for a home base is not over.

A source close to the company said it did not plan to establish its headquarters in Bahrain. The license in Bahrain also may not be enough to convince western regulators that Binance is adequately supervised in key areas such as anti-money laundering controls and consumer protection. “It’s better than nothing but not enough to make a material difference in the US and Europe,” a former US regulatory official said.

Rival exchange FTX also received a license from Dubai on Tuesday, and said it would set up a regional headquarters in the city. Binance’s Zhao told the Financial Times recently that he was now based in Dubai, where he bought a home last year, having previously run the global group from Singapore.

Binance last year appointed Richard Teng, a former Singaporean regulator and senior official at Abu Dhabi’s international financial centre, as chief executive of its Singapore arm, fuelling speculation that the company might try to make the city state its official home. However, the exchange’s Singapore unit in December dropped its application for a licence to run a crypto business in the country after regulators ordered Binance Singapore to stop all crypto transfers with the global exchange Binance.com, which the regulator placed on an investor alert list and said “may be in breach” of local law.

Teng has since been appointed the exchange’s regional head for the Middle East and north Africa. Recommended Cryptocurrencies Binance plots M&A spree as regulators scrutinise crypto trading unit Binance’s licensing by the Bahrain central bank marks the opening of a tussle among regional financial centres for dominance of the cryptocurrency space.

Bahrain, once the financial hub of the Middle East, has identified cryptocurrencies and fintech as areas in which it can regain momentum against its regional competitors. Dubai’s move into cryptocurrencies comes at a sensitive time for the United Arab Emirates. Earlier this month, the country was placed on the Financial Action Task Force’s “grey list” of jurisdictions under enhanced monitoring of their compliance with anti-money laundering measures.

Some UAE officials, keen to extricate the country from the grey list as soon as possible, have said they fear that welcoming cryptocurrency firms such as Binance will hinder the country’s recent attempts to clamp down on illicit money.

By: in London and in Dubai

Source: Binance forges links in the Gulf as it seeks fixed base | Financial Times

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Critics:

Financial regulators across the world have targeted Binance. However, Khalid Humaidan, CEO of the Bahrain Economic Development Board (EDB), believes the collaboration with the major cryptocurrency exchange will further advance the investment promotion agency’s mission to establish the Kingdom of Bahrain as a leading business hub.

The mounting regulatory pressure has had little effect on Binance’s expansion plans. To further boost its presence in the Middle East, the exchange was reportedly in talks of obtaining an operational license in Dubai.

Binance also made a comeback in Malaysia after an equity investment in MX Global, a regulated digital asset trading platform. Besides, the crypto giant was also eyeing an expansion to countries like Russia, Ukraine, Kazakhstan, and Uzbekistan. This came after the Russian President’s comment that the digital asset mining industry could benefit the country.

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Corporate Taxes Poised to Rise After 136-Country Deal

 
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Nearly 140 countries agreed Friday to the most sweeping overhaul of global tax rules in a century, a move that aims to curtail tax avoidance by multinational corporations and raise additional tax revenue of as much as $150 billion annually.

But the accord, which is a decade in the making, now must be implemented by the signatories, a path that is likely to be far from smooth, including in a closely divided U.S. Congress.

The reform sets out a global minimum corporate tax of 15%, targeted at preventing companies from exploiting low-tax jurisdictions.

Treasury Secretary Janet Yellen said the floor set by the global minimum tax was a victory for the U.S. and its ability to raise money from companies. She urged Congress to move swiftly to enact the international tax proposals it has been debating, which would help pay for extending the expanded child tax credit and climate-change initiatives, among other policies.

“International tax policy making is a complex issue, but the arcane language of today’s agreement belies how simple and sweeping the stakes are: when this deal is enacted, Americans will find the global economy a much easier place to land a job, earn a living, or scale a business,” Ms. Yellen said.

The agreement among 136 countries also seeks to address the challenges posed by companies, particularly technology giants, that register the intellectual property that drives their profits anywhere in the world. As a result, many of those countries established operations in low-tax countries such as Ireland to reduce their tax bills.

The final deal gained the backing of Ireland, Estonia and Hungary, three members of the European Union that withheld their support for a preliminary agreement in July. But Nigeria, Kenya, Sri Lanka and Pakistan continued to reject the deal.

The new agreement, if implemented, would divide existing tax revenues in a way that favors countries where customers are based. The biggest countries, as well as the low-tax jurisdictions, must implement the agreement in order for it to meaningfully reduce tax avoidance.

Overall, the OECD estimates the new rules could give governments around the world additional revenue of $150 billion annually.

The final deal is expected to receive the backing of leaders from the Group of 20 leading economies when they meet in Rome at the end of this month. Thereafter, the signatories will have to change their national laws and amend international treaties to put the overhaul into practice.

The signatories set 2023 as a target for implementation, which tax experts said was an ambitious goal. And while the agreement would likely survive the failure of a small economy to pass new laws, it would be greatly weakened if a large economy—such as the U.S.—were to fail.

“We are all relying on all the bigger countries being able to move at roughly the same pace together,” said Irish Finance Minister Paschal Donohoe. “Were any big economy not to find itself in a position to implement the agreement,  that would matter for the other countries. But that might not become apparent for a while.”

 

Congress’ work on the deal will be divided into two phases. The first, this year, will be to change the minimum tax on U.S. companies’ foreign income that the U.S. approved in 2017. To comply with the agreement, Democrats intend to raise the rate—the House plan calls for 16.6%—and implement it on a country-by-country basis. Democrats can advance this on their own and they are trying to do so as part of President Biden’s broader policy agenda.

The second phase will be trickier, and the timing is less certain. That is where the U.S. would have to agree to the international deal changing the rules for where income is taxed. Many analysts say that would require a treaty, which would need a two-thirds vote in the Senate and thus some support from Republicans. Ms. Yellen has been more circumspect about the schedule and procedural details of the second phase.

Friction between European countries and the U.S. over the taxation of U.S. tech giants has threatened to trigger a trade war.

In long-running talks about new international tax rules, European officials have argued U.S. tech giants should pay more tax in Europe, and they fought for a system that would reallocate taxing rights on some digital products from countries where the product is produced to where it is consumed.

The U.S., however, resisted. A number of European governments introduced their own taxes on digital services. The U.S. then threatened to respond with new tariffs on imports from Europe.

The compromise was to reallocate taxing rights on all big companies that are above a certain profit threshold.

Under the agreement reached Friday, governments pledged not to introduce any new levies and said they would ultimately withdraw any that are in place. But the timetable for doing that has yet to be settled through bilateral discussions between the U.S. and those countries that have introduced the new levies.

Even though they will likely have to pay more tax after the overhaul, technology companies have long backed efforts to secure an international agreement, which they see as a way to avoid a chaotic network of national levies that threatened to tax the same profit multiple times.

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The Organization for Economic Cooperation and Development, which has been guiding the tax talks, estimates that some $125 billion in existing tax revenues would be divided among countries in a new way.

Those new rules would be applied to companies with global turnover of €20 billion (about $23 billion) or more, and with a profit margin of 10% or more. That group is likely to include around 100 companies. Governments have agreed to reallocate the taxing rights to a quarter of the profits of each of those companies above 10%.

The agreement announced Friday specifies that its revenue and profitability thresholds for reallocating taxing rights could also apply to a part of a larger company if that segment is reported in its financial accounts. Such a provision would apply to Amazon.com Inc.’s cloud division, Amazon Web Services, even though Amazon as a whole isn’t profitable enough to qualify because of its low-margin e-commerce business.

The other part of the agreement sets a minimum tax rate of 15% on the profits made by large companies. Smaller companies, with revenues of less than $750 million, are exempted because they don’t typically have international operations and can’t therefore take advantage of the loopholes that big multinational companies have benefited from.

Low-tax countries such as Ireland will see an overall decline in revenues. Developing countries are least happy with the final deal, having pushed for both a higher minimum tax rate and the reallocation of a greater share of the profits of the largest companies.

 
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quintex-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1-1Related Contents:

 

 

 
 
 
 

Moderna Vaccine Creates Twice as Many Antibodies as Pfizer, Study Shows

Coronavirus: Modern vaccine generated more than double antibodies than Pfizer shot. Moderna Inc.’s Covid vaccine generated more than double the antibodies from a similar shot made by Pfizer Inc. and BioNTech SE in research that directly compared immune responses with inoculations.

A study of nearly 2,500 workers at a major hospital in Belgium found antibody levels among people who had not been infected with coronavirus before receiving two doses of the Moderna vaccine averaged 2,888 units per day. Milliliters, compared to 1,108 units / ml in a similar group that received two shots of the Pfizer shot.

The results, published Monday in a letter to the Journal of the American Medical Association, suggested that the differences could be explained by:

– larger amount of active ingredient in the Moderna vaccine – 100 micrograms versus 30 micrograms in Pfizer-BioNTech. Longer interval between doses of the Moderna vaccine – four weeks versus three weeks for Pfizer-BioNTech

Moderna’s vaccine was associated with a double risk reduction against breakthrough SARS-CoV-2 infections compared to Pfizers in a review of humans in the Mayo Clinic Health System in the United States from January to July. The results were reported in a separate study released prior to publication and peer review on 9 August.

The Moderna COVID‑19 vaccine (pINN: elasomeran), codenamed mRNA-1273 and sold under the brand name Spikevax, is a COVID-19 vaccine developed by Moderna, the United States National Institute of Allergy and Infectious Diseases (NIAID) and the Biomedical Advanced Research and Development Authority (BARDA).

It is authorized for use in people aged twelve years and older in some jurisdictions and for people eighteen years and older in other jurisdictions to provide protection against COVID-19 which is caused by infection by the SARS-CoV-2 virus. It is designed to be administered as two or three 0.5 mL doses given by intramuscular injection at an interval of at least 28 days apart.

It is an RNA vaccine composed of nucleoside-modified mRNA (modRNA) encoding a spike protein of SARS-CoV-2, which is encapsulated in lipid nanoparticles

By:

Source: Covid: Moderna Vaccine Creates Twice as Many Antibodies as Pfizer, Study Shows – Bloomberg

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