Aurelia Butler

WASHINGTON (Reuters) – The U.S. Internal Revenue Service plans to allow taxpayers to submit all documents and correspondence to the agency digitally for the 2024 tax filing season and will convert all paper tax returns to digital documents by the 2025 season, the Treasury Department said on Wednesday.The initiative, part of a decade-long, $60 billion program to modernize systems and improve tax enforcement, will allow taxpayers to digitally submit all correspondence, non-tax forms and responses to IRS notices, the Treasury said.Many of these forms now can only be submitted on paper by mail, and the plan could eliminate handling of up to 125 million such documents per year.Most U.S. tax returns are already filed digitally, which results in faster refunds. But the COVID-19 pandemic and associated filing delays and staffing shortages saddled the IRS with a massive backlog of 22.5 million unprocessed paper tax returns by February 2022 that needed some form of manual processing.The agency has been churning through the backlog, partly with the help of new scanning technology, reducing it to 2.15 million returns needing processing, reviews or corrections.U.S. Treasury Secretary Janet Yellen said in excerpts of remarks at an IRS facility in McLean, Virginia, that taxpayers will always have the choice to submit documents by paper.”For those taxpayers, by filing season 2025, the IRS is committing to digitally process 100 percent of tax and information returns that are submitted by paper – as well as half of all paper correspondence, non-tax forms, and notice responses,” Yellen said.The new scanning technology and other improvements in IRS customer service were made possible by funds provided in last year’s climate-focused Inflation Reduction Act, initially approved at $80 billion over a decade, but reduced to $60 billion by this year’s bipartisan deal to increase the federal debt ceiling.The funds are separate from IRS’ annual operating budget, which some Republicans in Congress have vowed to cut. Yellen said “stable and sufficient annual appropriations” for the IRS were needed to sustain progress on initiatives to improve customer service, such as the paperless processing effort and reducing phone call response times. More

HONG KONG/BEIJING (Reuters) -Some Chinese city governments have made it harder for developers to access tens of billions of dollars from property sales held in escrow accounts, people familiar with the matter said, raising risks the cash-strapped companies will be squeezed even more.The moves are aimed at ensuring the completion of more unfinished projects at the city level, they said, at a time home sales are sliding and the future of the whole sector is uncertain.The tightening appears to run contrary to the plan of the central Chinese government, which has assured help to stabilise a sector that has been hit by both a years-long liquidity crunch and slumping demand.”That’s like a Catch-22 dilemma,” said Gary Ng, Asia Pacific senior economist at Natixis, adding that while local governments may want to ensure that all housing projects can be delivered, it is hard for developers to do it without access to liquidity.The curbs may mean private developers, who have been hit harder by the crisis in the sector, will have lower capital usage efficiency, and can imply a larger credit risk for some small developers, said Ng.Chinese developers are allowed to sell residential projects before completion but are required to put those funds in escrow accounts. Local city governments permit them to withdraw a portion of the funds, depending on the progress of construction.As defaults rippled across the property sector, regulators last year relaxed some escrow rules in an effort to ease the liquidity stress for developers, enabling them to finish construction work on apartments. Some city governments, however, have started curbing developers’ access to the escrow funds from the second quarter of this year as the outlook for the sector worsened, with sales trending down since April on weak demand and the economic outlook darkening.Senior executives at three Chinese developers said they were not able to withdraw funds even after the completion of some projects. “It is a general phenomena now,” said one of them, whose firm has not yet defaulted on any debt.Two of them said that more than 80% and 90% of their cash, respectively, is now trapped in the escrow accounts, and efforts to withdraw funds for construction purposes have been thwarted by the local authorities. That compared to around 30% before the sector was hit by the debt crisis in mid-2021, and around 60% in the early days of the crisis, according to analysts.The two executives, who declined to be named as they were not authorised to speak to the media, said they believe the tighter access was a result of local authorities wanting to ensure there was enough capital for completing home construction in the cities. “It has become very difficult again in the past few months for us to withdraw money from the escrow accounts,” said an executive at one of the developers that has defaulted on its debt obligations said. “At the end of last year it had been easier after the government easing.”In the first half of this year, funds that developers used for property development reached nearly 7 trillion yuan ($977 billion), and about a third of that was from down payments and presale funds, according to data from the National Bureau of Statistics.China’s housing ministry did not respond to Reuters request for comment on the tightening of developers’ access to escrow funds. The Hang Seng Mainland Properties Index reversed direction from a 0.7% rise to fall as much as 0.5% in the afternoon session after the Reuters report, before closing down 0.1% on Wednesday.FALTERING HOUSING DEMANDThe new measures come as property demand is sluggish – China’s property sales between May and June showed the largest monthly drop this year, based on sales by floor area, and investment in property also slumped.A person who works at a state bank in a city in Hunan province, speaking on the condition of anonymity, said the local housing authority has ordered the bank to implement stricter rules for withdrawal of escrow funds.Under those rules, the authority has asked the bank to make escrow funds available only to developers who have other sources of funding to cover construction costs, said the person.Hunan’s housing regulator did not respond to a request for comment.Another developer said some banks are also holding up the funds as they now evaluate a firm’s different projects across cities together, so that pre-sale proceeds from one could be used to cover the construction of another development in another city.In cities such as Hefei and Xiamen, the local governments manage the accounts of a batch of developers together, so sales from one project could be used to cover the construction costs of a different developer, executives at two other developers said.The Hefei and Xiamen governments did not respond to requests for comment.($1 = 7.1652 Chinese yuan) More

Giorgia Meloni was exulting just last week that IMF forecasts showed Italy growing faster than Germany and France this year — proof, she said, of the “effectiveness” of her rightwing coalition government’s economic policies. But Italy’s prime minister received a rude shock on Monday, after data showed the country’s post-coronavirus pandemic economic rebound lost far more steam than was expected.Italy’s economy shrank by 0.3 per cent in the second quarter of 2023, far worse than the zero growth forecast by most analysts. The eurozone as a whole, meanwhile, registered a 0.3 per cent expansion.The grim reading highlights the challenges confronting Meloni’s government, which has been waging a dramatic campaign on high consumer prices, as it strives to keep growth on track and put Italy’s heavy debts on a more sustainable footing.“This is a nasty surprise for Meloni,” said Francesco Galietti, founder of Rome-based political risk consultancy Policy Sonar. “She was focusing so much on inflation she probably did not expect growth to lose steam so quickly.”Meloni’s coalition government is already facing a growing political backlash as it starts to phase out the controversial “citizen’s income” poverty relief scheme that the populist Five Star Movement launched in 2019. Rome has decided to impose stricter eligibility criteria amid employers’ complaints that the programme, which last year benefited an estimated 1.7mn households, discouraged Italians from taking up jobs, and created artificial labour shortages. In recent days, about 160,000 people whom the government considers able-bodied and potentially employable received text messages that their benefits were being cut, leading to protests in Naples and elsewhere.Opposition parties say the growth figure raises serious questions about Italy’s economic direction.“This is not about economic downturns or bad luck, these are the results of the blatant inability of this government to manage economic processes and encourage investment,” Ubaldo Pagano, a lawmaker from the opposition Democratic party, said in a statement. Italy’s finance ministry blamed the contraction on global factors beyond Rome’s control, including the European Central Bank’s repeated interest rate rises — which have been fiercely criticised by various members of Meloni’s government.“The results were influenced in particular by the decline in the international industrial cycle, the rise in interest rates and the impact of the prolonged phase of rising prices of the purchasing power of households,” the ministry said in its statement.Filippo Taddei, senior European economist at Goldman Sachs, said Italy’s disappointing growth figures are part of a broader malaise affecting European manufacturing, including in Germany — which has seen growth stagnate in recent quarters — and Austria, as the export-oriented industry wrestles with weak global demand. “[The Italian figure] was a downside surprise and below our expectations but the data are clearly saying that manufacturing is facing extended weakness,” Taddei said.It also reflects conditions specific to Italy, particularly the Meloni government’s decision to put the brakes on its controversial “Superbonus” scheme.The programme, which had offered Italians a 110 per cent tax credit to undertake energy efficiency-enhancing home improvements, fuelled a frenzied post-pandemic construction boom as people undertook costly home improvements at public expense.Rome announced big changes to the scheme in February. Italian construction activity in May was down 3.8 per cent from first-quarter levels. “It was fiscally prudent for the Meloni government to curb the Superbonus last February,” Taddei said. “The transition is not easy but it was well received by market participants and understandably so.”Angelica Donati, president of the youth wing of Italy’s national builders’ association, said that Superbonus had revved up GDP growth and “it was impossible for the fact that it was essentially stopped cold in its tracks not to have a negative repercussion on the economy”.At the same time, investments funded by Italy’s €191.5bn EU-funded Covid recovery scheme has progressed far more slowly than expected. “It was the perfect storm,” Donati said.Analysts still expect Italy’s economy to regain momentum, enabling the country to reach the finance ministry’s 1 per cent GDP growth target for 2023.While construction may remain weak due to the impact of the Superbonus phaseout, Taddei said manufacturers’ performance would “pick up”. However, there were no signs of improvement in the fortunes of Italian manufacturers at the start of the third quarter. S&P Global’s monthly survey of purchasing managers found “output and new orders both fell at historically steep rates” in July, and estimated production had fallen the most since the pandemic hit more than three years ago.

“Slowing global demand, restrictive credit conditions and the impact of tightening monetary policy will continue to play a role in such [manufacturing sector] weakness,” said economist Loredana Maria Federico, of Italian bank UniCredit, though she was confident tourism would help growth rebound. Lorenzo Codogno, a former senior Italian treasury official, said he expected households to spend more as inflation falls. As the Next Generation EU programme moves forward, that would support growth too. “The economy is clearly weakening because of the tightening of monetary conditions by the ECB but not to the point to justify a recession,” he said. “There is so much stimulus in the pipeline.”Additional reporting by Martin Arnold in Frankfurt and Giuliana Ricozzi in Rome More

Turkish equities have posted blistering gains this summer as an economic policy overhaul and fears about a fresh flare-up in inflation draw local savers and foreign investors into the market. The benchmark Bist 100 index has soared 46 per cent since the end of May. The gauge gained 14 per cent in US dollar terms over that period despite a huge fall in the lira, outpacing a rise of 9 per cent for MSCI’s emerging markets index, FactSet data shows. The rally comes at a time when Turkey’s $900bn economy is in flux. A wave of stimulus measures unleashed by President Recep Tayyip Erdoğan ahead of May’s election is fuelling a fresh bout of inflation even as the country’s new economic management team attempts to restore “rational” policymaking. The two forces are working in tandem to make Turkish equities look more appealing to local savers and some foreign fund managers. “Hopes [about the new economic policy] are pushing stocks up, but even if you are negative, betting on higher inflation, that is also helpful for equities,” said Emre Akcakmak, a senior consultant at East Capital, a specialist emerging-markets fund manager.Foreign investors, who have largely abandoned Turkish stocks in recent years, have pumped $1.6bn into the country’s equities market in the seven weeks to July 21, according to central bank data. The inflows have come as central bank governor Hafize Gaye Erkan, a former Wall Street banker who was appointed in June, has more than doubled interest rates in an attempt to rein in inflation, which is running at almost 40 per cent. Meanwhile, finance minister Mehmet Şimşek, a former deputy prime minister who is well-regarded by foreign investors, has boosted petrol and value-added taxes on goods and services. The move is part of an effort to cool an economy that went into overdrive after Erdoğan showered the public with giveaways, such as a month of free gas and wage increases for public workers, before May’s election, which he won. Şimşek’s tax increases combined with the lingering effects of the pre-election stimulus are expected to send inflation climbing to nearly 60 per cent by year-end, before it begins easing over the next two years, according to central bank forecasts. The new jolt of inflation had prompted local residents to rush into stocks in an attempt to shield their savings at a time when deposit rates offered by banks were falling, said Murat Gülkan, chief executive of OMG Capital Advisors in Istanbul. The inflation-driven buying spree is a repeat of 2022, when the same trend led Turkish stocks to a world-leading 110 per cent US dollar return. “The market has been driven mostly by local investors for close to three years now,” Gülkan said.Investors have also turned somewhat more hopeful that Erdoğan will at least for a time back away from his other unorthodox policies, such as a long-held objection to high interest rates, after the president last Friday appointed a trio of respected economists as deputy central bank governors. Akcakmak said that beyond the economic factors, some investors might have been lured into Turkish stocks since they remain very inexpensive from a valuation perspective. The Bist 100 is priced at 5.8 times expected earnings over the next year, FactSet data shows. That compares with about 12 times for the MSCI EM index. Turkish conglomerate Koç Holding last week sold a $250mn block of shares in lender Yapı Kredi in an off-exchange deal in a further sign of how the equities market is warming. Almost 40 US and European investors took part in the transaction, according to Şimşek.Gülkan said the Yapı Kredi share sale is “more significant than the other foreign inflow numbers,” which he described as a “blip at the bottom” rather than a “sea change”. Still, in a further sign of how sentiment around Turkish assets is gradually improving, the country’s foreign currency-denominated sovereign debt has rallied over the past two months after a sell-off during May’s election. An index collated by JPMorgan tracking the country’s international debt has jumped 12 per cent from its May lows. The cost to protect against a Turkish debt default using five-year credit default swaps has also eased to the lowest level since September 2021 after a sharp rise in May. Still, many long-term investors say they remain cautious about Turkish assets on concerns that policymakers are moving too slowly given the scale of the country’s economic woes and as they wait to see whether Erdoğan sticks to the new economic programme. “The evident preference for a gradual approach to normalising monetary conditions and removing distortionary regulations, and a record of politically driven policy reversals, mean that policymakers could struggle to sustainably rebuild investor confidence, reduce macro-financial stability risks and ease external vulnerabilities,” Fitch said last week.  More

When China’s leaders last week signalled that Beijing would introduce measures to support the economy as it makes a “tortuous” recovery from the pandemic, US-listed China exchange traded fund investors barely reacted.Data provided by VettaFi shows that in the week following the politburo meeting only the KraneShares CSI China Internet ETF (KWEB) attracted significant inflows, of $136.1mn. The ETF that ranked second in terms of inflows, attracting $22.3mn, was the Direxion Daily FTSE China Bear 3x Shares (YANG) ETF — which offers the opportunity to bet that China’s market will fall. Inverse ETFs allow investors to make money when markets decline but result in magnified losses if the market rises.Most of the 57 China-focused US-listed ETFs in VettaFi’s database attracted no inflows at all and 12 actually experienced outflows — the worst affected being the iShares MSCI China ETF (MCHI), which had outflows of $47.6mn in the week to July 31. “It’s easy to go broke betting on China policy meetings providing huge and definitive catalysts for Chinese stocks,” said Philip Wool, managing director and head of research at Rayliant Global Advisors. Rayliant runs the Rayliant Quantamental China Equity ETF (RAYC), which provides overseas access to China-listed A-shares.“Instead, I try to assess what the meeting says about how Beijing’s thinking is evolving,” said Wool. He said notes from the politburo meeting indicated that authorities recognised where the real problems were in terms of weak domestic demand, but he did not expect a huge stimulus such as Beijing injected during the global financial crisis. “You’ve got a country with massive pent-up household savings and a clear desire to grow its middle class in the long run and build a system that relies more on domestic consumption than exports,” Wood added.Brendan Ahern, chief investment officer at Krane Funds Advisors, said the positive messaging from the politburo meeting should have made investors realise it was time to increase their China weighting.“Here is the key for investors: the release [of the politburo statement] is just the start,” Ahern said. “Think global investors are positioned for this? Me neither.”The problem, according to Kevin Carter, founder and chief investment officer of EMQQ The Emerging Markets Internet & Ecommerce ETF, which has a 56 per cent exposure to China, is that a series of shocks last year, including the China tech crackdown, and the threat of delisting that loomed over US-listed Chinese entities, made many investors believe China was “uninvestable”.But Carter’s belief in China and particularly China’s technology sector is undimmed. He believed the measures Beijing introduced to counter the rise of the tech giants were sensible.“In terms of the internet and ecommerce, China is the most advanced country on the planet,” he said. More

SEOUL (Reuters) -South Korea’s consumer inflation cooled more than expected in July to its slowest in 25 months, official data showed on Wednesday, supporting market views that the monetary tightening cycle was over contrary to the central bank’s hawkish rhetoric.The consumer price index stood 2.3% higher in July than a year earlier, after a 2.7% rise in June and compared with a median 2.4% increase forecast in a Reuters survey of economists.It marked the weakest annual increase since June 2021, according to Statistics Korea, and compared with a near 24-year high of 6.3% in July 2022 and the central bank’s medium-term target of 2%.It was also the second consecutive month the consumer price data came in lower than market expectations.The finance ministry said after the data release inflation would continue to stabilise this year, after temporary upward pressure in August and September from seasonal factors, but the central bank said it would rebound from August to around 3% by the end of the year.”Considering domestic conditions, anyone in the financial market cannot help but expect a rate cut by the central bank,” said economist Kong Dong-rak at Daishin Securities.”But, there are other factors that need to be taken into consideration,” Kong added, citing monetary policy in the United States.On a monthly basis, consumer prices rose 0.1%, picking up from no change the previous month, but weaker than a 0.2% rise expected by economists.Broken down by sector, prices of petroleum products were 0.7% lower than the month before, but agricultural prices jumped 4.7%, the most in six months, while public utility prices dropped 4.9%.There was heavy rain in mid July, disrupting agricultural supply and causing upward price pressure on some items.Core inflation, which excludes volatile food and energy prices, slowed to 3.3% on an annual basis from 3.5% the previous month, the slowest rise since April 2022.Last month, the Bank of Korea extended its pause in its tightening cycle to a fourth meeting, after the last interest rate hike in January, but said it would maintain a tight stance amid still-high prices. More