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Australia, Canada, UK and US Agree to Establish Joint Task Force

IR-2004-61, May 3, 2004

WASHINGTON - Tax Commissioners of Australia, Canada, the United Kingdom and the United States have now established a joint task force to increase collaboration and coordinate information about abusive tax transactions by signing a Memorandum of Understanding (attached) in Williamsburg, Virginia on April 23, 2004.

An initial focus of the work will include the ways in which financial products are used in abusive tax transactions by corporations and individuals to reduce their tax liabilities, and the identification of promoters developing and marketing those products and arrangements.

The joint task force will assist the respective tax administrations in addressing challenges arising from abusive tax transactions. While the tax administrations operate primarily within their own borders, many abusive tax transactions employ strategies that cross borders, and many of the promoters of these transactions operate globally. Setting up a joint task force will enable the four countries to:

• Share expertise, best practices and experiences in the field of tax administration to identify and better understand abusive tax transactions and emerging schemes, as well as those who promote them.
  
  
• Exchange information about specific abusive tax transactions and their promoters and investors within the framework of the countries' existing bilateral tax treaties.
  
  
• Carry out their individual abusive tax transaction enforcement activities more effectively and efficiently.

"This represents an unprecedented international effort to combat the plague of abusive tax shelters," IRS Commissioner Mark W. Everson said. "The creation of this group sends a strong, unmistakable message to promoters who cross borders to cloak tax schemes. This effort will help us build faith in our country's commitment to a fair tax system."

Officials of the tax administrations will work together in Washington, DC during the initial phase of the task force's operations. The Commissioners will review the operation of the task force after twelve months.

ITIN Application changes

In Notice 2004-1, the IRS revised its procedures for issuance individual taxpayer identification numbers (ITINs), in part, by revising Form W-7, Application for IRS Individual Taxpayer Identification Number.

ITINs are only issued to individuals required to have a U.S. taxpayer identification number for U.S. tax purposes, but not eligible to obtain a Social Security number. The IRS has issued 7 million ITINs since 1996; only about 75% of these have been used for return purposes. The remaining 25% may have been requested solely to serve as a form of identification; like a Social Security number. However, because ITINs are strictly for tax processing, IRS does not apply the same standards as do agencies that provide genuine identity certification. The IRS has taken these steps to help ensure that ITINs are used for their intended purpose; consequently, it updated Form W-7.

Three out of four hires come from Internet referrals

[CCH, HR Management, February 2004] – The Internet has become an important source to help employers recruit job candidates. But it's surprising to learn just how unknowledgeable most employers are about the way applicants actually use the Internet to conduct job searches, according to a survey of large corporations conducted by online recruitment consultants Gerry Crispin and Mark Mehler of CareerXroads.

The study's results indicate that nearly one-third of new hires at Fortune 500 companies started their successful job search on the Internet. In addition, the number of applicants hired via the Internet increased more than 11 percentage points since 2001 when the annual survey was started.

Some of the study's key findings include:

60 percent of all external hires in 2003 can be attributed to two channels: employee referrals and the Internet, and these sources are continuing to grow. By 2005 these sources are expected to account for three out of every four hires.
Of the hires from the Internet, employers report 68 percent came from their company Web site.

Niche job sites were a larger source of hires from the Internet in 2003 than leading job boards combined:

1. Niche Sites: 17.6 percent
2. Monster.com: 8.7 percent
3. CareerBuilder: 4.1 percent
4. Hotjobs: 1.8 percent

The job market will continue to be tight. The study also showed that while more positions were filled in 2003 (6 percent) than 2002, slightly fewer positions will be filled in 2004 (-2 percent).

What does this mean to employers? Crispin notes, "It's time to hone succession plans and retention programs."

DOL statement on mutual fund market timing abuses and plan fiduciaries

[CCH, Pension and Benefits, February 2004] – The Department of Labor (DOL) issued a statement on February 17, 2004 addressing the duties of plan fiduciaries in view of recent investigations of mutual funds regarding late trading and market-timing abuses.

Plan fiduciaries should follow prudent plan procedures relating to investment decisions and document their decisions, stated Ann L. Combs, Assistant Secretary of the Employee Benefits Security Administration (EBSA). They must make appropriate efforts to act reasonably, prudently and solely in the interests of participants and beneficiaries, stated Combs.

When a specific mutual fund has been identified as being under investigation by Federal or state regulators, fiduciaries must consider the nature of the alleged abuses, the potential impact of the abuses on the plan's investments, the steps taken by the fund to limit such abuses in the future, and any remedial action contemplated to make investors whole. For funds not currently under investigation by regulators, fiduciaries will need to consider whether they have sufficient information to conclude that the funds have safeguards in place to limit abuses, Combs added.

In considering appropriate actions to take in limiting market-timing problems, Combs indicated that plans which offer mutual funds that impose sale redemption fees, or limit a participant's ability to move in or out of particular investments within a certain time period, would not run afoul of ERISA Sec. 404(c) volatility requirements.