Aurelia Butler

WASHINGTON (Reuters) -The U.S. Treasury and Internal Revenue Service said on Monday they will close a tax loophole exploited by large, complex partnerships, an action that they estimated could raise $50 billion in new revenue over 10 years.The Treasury said the IRS would no longer allow partnerships to shift tax liabilities to related parties or different legal entities in order to maximize tax deductions and minimize liability.New guidance on the subject coincides with the IRS’ stepped-up enforcement campaign to increase audits of large, complex partnerships, backed by some $60 billion in funding over 10 years for the agency approved by Congress in 2022.The IRS is releasing several proposed regulations related to the change, which would prevent transactions that shift the tax basis of assets to reduce gains and taxable income.”The proposed regulations, once finalized, would effectively eliminate the inappropriate tax benefits created from these abusive transactions between related parties,” the Treasury said in a statement.The Treasury and IRS also are releasing a revenue ruling stating that certain related-party partnership transactions to shift tax basis “lack economic substance,” which Treasury said would support the IRS position in current and future audits. The Treasury said tax filings from “passthrough” business partnerships increased by 70%, to 297,400 in 2019 from 174,100 in 2010. But the audit rate for these partnerships fell to 0.1% in 2019 from 3.8% in 2010, due in large part to budget cuts over the decade. More

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LONDON (Reuters) – Talks between Ukraine and its international bondholders designed to cut its debt to help finance its war effort ground to a halt on Monday after the two sides failed to reach an agreement.It means the clock continues to tick down to a potential $23 billion sovereign default later in the summer. That’s a headache that Kyiv and supportive institutions like the International Monetary Fund (IMF) will want to avoid, so what happens now? KEEP TALKING? The two sides seem far apart but Ukraine’s Finance Minister Serhiy Marchenko says his team will continue talking to bondholders. In fact it will expand the list as previously it was only speaking with a select group of larger creditors – money managers like pension and investment funds – whose names have not been disclosed.The issue though is that the government is facing a tight deadline. A two-year debt freeze struck months into Russia’s February 2022 invasion runs out at the start of August, meaning Kyiv could soon find itself on the verge of default again.WHAT WOULD BE DIFFERENT?One thing that could make a difference according to one source familiar with the situation is that the IMF is due to provide new estimates on Ukraine’s economy in the next few weeks as part of the fourth review of the $15.6 billion support programme it set up for the country last year.On one hand, Russia’s advance towards Ukraine’s second biggest city Kharkiv and attacks that have destroyed half of Ukraine’s electricity-generating capacity in recent months are likely to mean the numbers look worse. The government warned in the statement on Monday that “illustrative structures and associated economics” from the IMF figures would likely be revised downwards in the fourth review. At the same time though, the Group of Seven (G7) rich democracies have just agreed to use proceeds from frozen Russian assets to give Ukraine $50 billion in loans which should help rearm the army and rebuild the economy – if only in the longer term. By talking to a broader set of bondholders, Ukraine might also get a better sense of whether a compromise deal that all parties can accept is possible.Ukraine’s proposal that was rejected had asked the creditors to slash the value of their bonds by up to 60 percent. The creditor committee in return had proposed cuts of just over 22 percent.The government also launched some other scenarios, such as the “amended base structure” with potentially better terms. While those never made it to the formal proposal stage and were illustrative only, it indicates there might be other structures to talk about. WHAT IF THERE’S STILL NO DEAL?The difficulties in the talks have reflected the deep uncertainty about what happens in the war and how much debt Ukraine’s economy will be able to carry afterwards.If no agreement can be struck, Ukraine would likely be heading for default in August, unless it decided it was better to start making the payments again or got an extension to the current debt freeze arrangement.The big problem though is that without Kyiv cutting its debt level, the IMF might come under pressure to put the breaks on its crucial programme, as Ukraine’s finances would be viewed as just too unsustainable. More

The bank’s QT strategy, which involves reducing bond purchases, is expected to commence following a reduction plan to be formulated at the July meeting.UBS analysts predict the BoJ’s QT will result in a reduction in bond purchases by approximately JPY 2 trillion per month. This reduction could lead to a 3-5% decrease in the BoJ’s government bonds over the next year.However, the recovery in demand has been slower than anticipated, prompting UBS to revise its forecast for the next rate hike from July to October. Even with this adjustment, market predictions still indicate a 30% chance of a July rate hike.In their June meeting, the BoJ maintained the target for short-term interest rates and the uncollateralized call rate at 0.0-0.1%. The bank also indicated it would decide on a specific reduction plan for the next 1-2 years at the July meeting and then initiate QT.UBS analysts believe the BoJ’s gradual approach to QT is primarily a safeguard against sudden interest rate fluctuations. If the BoJ adopts more aggressive measures such as reducing bond purchases by half or completing QT within two years, there could be a risk of significant market volatility and a broader scope for interest rate increases.The UBS report further discusses the implications for the foreign exchange market and Japanese equities. It suggests that with the BoJ’s decision to delay tapering its JGB purchases till July, USDJPY is likely to remain at elevated levels in the near term.However, the upside risks for the pairing could be mitigated considering BoJ Governor Ueda’s comments about a substantial reduction in JGB purchases.The analysts also discuss the implications for Japanese equities, mentioning the positive impact of inflation, wage growth, and corporate governance reforms. These factors, along with the shift in BoJ Governor Ueda’s tone against yen weakness, have heightened market awareness, leading to a likely delay in policy rate hikes. More