Aurelia Butler

WASHINGTON (Reuters) -The U.S. Internal Revenue Service plans to hire nearly 30,000 new employees and deploy new technology over the next two years as it ramps up an $80 billion investment plan to improve tax enforcement and customer service, it said on Thursday .The tax agency, in its long-awaited Strategic Operating Plan, said it will obligate about $8.64 billion of the new funding during the 2023 and 2024 fiscal years, and that 8,782 of the new hires during those years will be enforcement staff.”The IRS is going to hire more data scientists than they ever have for enforcement purposes,” U.S. Deputy Treasury Secretary Wally Adeyemo told reporters, adding that these would complement more traditional tax attorneys and revenue agents in using new data analytics technology to identify audit targets.The IRS also will continue to ramp up customer service hiring after taking on 5,000 new taxpayer services staff in recent months to answer telephones, reopen taxpayer assistance centers and process tax returns.Including those new employees, customer services hiring will total 13,883 full-time-equivalent staff over the two-year period, according to the 148-page plan.But a significant portion of these new hires will replace the nearly 12,000 IRS employees expected to retire over the next two years — including more than 4,700 enforcement staff, a U.S. Treasury official said.The $80 billion in new funding from last year’s climate-focused Inflation Reduction Act is aimed at rebuilding the agency’s audit capabilities and 1960s-era computer technology after a decade of funding cuts mostly by Republican-controlled Congresses.It also aims to help close the “tax gap” between taxes owed and those paid, estimated by Treasury at some $600 billion a year, by focusing new audits on the wealthiest Americans.COMPLEX AUDITSThe IRS said $47.4 billion — nearly 60% of the $79.4 billion worth of investments listed in the plan — would be allocated toward expanded enforcement of “taxpayers with complex tax filings and high-dollar noncompliance.”Those audit targets include wealthy individuals, corporations and complex partnerships, which have grown in number while IRS audit staff has shrunk by nearly half over the past decade, new IRS Commissioner Danny Werfel told reporters.Werfel said that the agency would soon provide hiring and spending plans for the 2025 fiscal year and would continually update the operating plan.Tax experts say among the IRS’ biggest challenges will be recruiting the tens of thousands of mid-career accountants, tax lawyers and other staff capable of handling complex audits amid tight labor market.The IRS is devoting $12.4 billion to new technology and $4.3 billion to taxpayer services. Early changes will allow taxpayers to respond online to dozens of tax notices by the end of fiscal 2024. REPUBLICAN BACKLASHThe plan drew fresh complaints from Republicans who want to repeal the IRS funding as part of their demands for raising the $31.4 trillion federal debt ceiling.Senator Steve Daines, a Montana Republican, said the IRS “plans to deploy an army of tens of thousands of IRS agents to increase audits on Montana families and reach into the pocketbooks of Americans.” Werfel sought to debunk erroneous Republican claims that the funding will create an army of 87,000 armed agents to harass Americans on their taxes. He said that the percentage of Criminal Investigation staff would not change from its current proportion of about 3% of the IRS workforce.Only about 2,100 Special Agents in the Criminal Investigation unit are authorized to carry firearms, according to a Reuters Fact CheckThe new IRS chief, said that he would enforce Treasury Secretary Janet Yellen’s pledge to not increase historical audit rates for Americans earning under $400,000 and would base this on “historically low” 2018 audit rates. More

TOKYO (Reuters) -Japan’s new central bank chief will take baby steps in any shift away from the radical monetary experiment of his predecessor, if recent comments are any guide, but a deeper history of his thinking shows a taste for bolder action.Markets are rife with speculation that Kazuo Ueda, who becomes Bank of Japan (BOJ) governor on Sunday, will dismantle incumbent Haruhiko Kuroda’s massive stimulus programme that has drawn criticism for distorting market pricing and crushing bank profits.In a sign he will be in no rush to shift policy, Ueda told a parliamentary confirmation hearing in February that he will “spend time and engage in thorough discussions” with BOJ board members on how to address the side-effects of prolonged easing.But he also said there was no “magical” policy that cures economic woes, a sign he will shift away from his predecessor’s shock-and-awe approach of deploying a range of radical steps with a strong focus on achieving the BOJ’s 2% inflation target.So far, Ueda has offered few clues on when and how the BOJ could phase out the current stimulus package that combines huge asset buying, negative short-term interest rates and a cap on the 10-year bond yield set under yield curve control (YCC).But a closer look at his past, more candid remarks as a private-sector economist, and as a BOJ board member during Japan’s battle with deflation in the late 1990s, offers a glimpse of his policy and communication style.In an opinion piece published by the Nikkei newspaper last July, Ueda described YCC as a framework “unsuited for minor fine-tuning,” as gradually raising the yield cap will prod markets to price in the chance of further tweaks that will then make it difficult for the BOJ to defend the cap.The remark suggests Ueda may seek to end YCC in a single blow, rather than in several stages, some analysts say.As Ueda had predicted, the BOJ’s decision in December to raise the cap set for the 10-year bond yield to 0.5% from 0.25% put upward pressure on long-term rates by fuelling market expectations of a near-term end to YCC.The BOJ will face a similar dilemma dealing with markets even if it targeted a shorter-duration yield than the current 10-year zone, Ueda wrote in the piece.”The BOJ must come up with a strategy towards an exit,” he said, adding that U.S. and Australian central banks “got the job done with a single adjustment” when they ended yield control.His preference for a comprehensive, rather than gradual, approach can also be seen in accounts of his involvement in the BOJ’s battle with deflation as board member from 1998 to 2005.In the months leading up to the BOJ’s decision in February 1999 to adopt zero interest rates, Ueda said he preferred “deploying the limited means available in a single blow at the appropriate timing, rather than launching small steps incrementally,” minutes of the October 1998 meeting showed.CLEARER COMMUNICATIONTo be sure, current uncertainty over the economic and market outlook supports the case for Ueda to move gradually. Removing YCC altogether will deprive the BOJ tools to combat an unwelcome spike in bond yields, says former board member Takahide Kiuchi.”The BOJ could expand the allowance band around its yield target as early as June. But a full-blown overhaul of YCC and end to negative rates might take years,” he said.Ueda may also roll back the quantitative element of the BOJ’s current stimulus, such as a pledge to keep pumping money into the economy until inflation stably exceeds 2%.Accounts of his days as BOJ board member also suggest Ueda is no fan of heavy money printing. He only reluctantly voted for the BOJ’s decision to adopt quantitative easing in 2001, saying he did not “see much meaning” in setting a reserve target.In any case, Ueda will likely deliver clearer guidance on the future policy path than Kuroda, who at times was criticised for wrong-footing markets with abrupt policy changes.Ueda played a key role when the BOJ became the first central bank to introduce forward guidance in 1999 by pledging to keep rates at zero until Japan sees prospects for ending deflation.Both in the confirmation hearings and in past remarks as board member, he has stressed the importance of using communication to enhance the effects of monetary policy.”Ueda’s biggest mission will be to untangle and clean up the complex, experimental monetary policies pursued by Kuroda,” said Kiuchi, currently an economist at Nomura Research Institute.”It may take most of his five-year term, but his final goal might be to revert back to the conventional monetary policy framework that target short-term rates.” More

NEW YORK (Reuters) – Federal Reserve lending to financial institutions eased modestly in the latest week, central bank data showed on Thursday, in a sign that financial sector woes that began last month may be beginning to settle down.Total lending to the three main programs aimed at bolstering bank liquidity stood at $323.3 billion as of Wednesday, down from $332.7 billion on March 29. At the start of March, before banking sector problems emerged, total Fed liquidity lending to banks was just shy of $5 billion. Borrowing over recent weeks has been spurred by the failure of Silicon Valley bank, amid trouble at other insitutions, which in turn drove the Fed to provide levels of market support that outstripped what was seen in 2008 during the height of the financial crisis.While lending is down, it remains high overall. Even so, J.P. Morgan economist Michael Feroli said “big picture it looks like the banking stress is contained and things are very gradually normalizing.” In its weekly report, the Fed said banks sought $69.7 billion from its discount window lending facility as of Wednesday, down from $88.2 billion on March 29. The discount window is the central bank’s main tool to extended liquidity to deposit-taking banks. Lending via the Bank Term Funding Program stood at $79 billion as of Wednesday, versus $64.4 billion the prior Wednesday. Credit tied to the Federal Deposit Insurance Corporation’s work to wind down failed banks stood at $174.6 billion on Wednesday, down from $180.1 billion on March 29. The liquidity taken by banks and other factors caused the overall size of the Fed’s balance sheet to move to $8.682 trillion, down from March 29’s $8.756 trillion. More

NEW YORK (Reuters) -The Federal Reserve’s preferred bond market signal of an upcoming recession has plunged to fresh lows, bolstering the case for those who believe the central bank will soon need to cut rates in order to revive economic activity.Research from the Fed has argued that the “near-term forward spread” comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction.That spread, which has been in negative territory since November, plunged to new lows this week, standing at nearly minus 170 basis points on Thursday.Fed Chair Jerome Powell said last year that the 18-month U.S. Treasury yield curve was the most reliable warning of an upcoming recession.”Powell’s curve … continues to plunge to fresh century lows,” Citi rates strategists William O’Donnell and Edward Acton said in a note on Thursday. Refinitiv data showed the curve was the most inverted since at least 2007.Recession fears have surged in recent weeks, with investors worried the tumult in the banking system sparked by the March collapse of Silicon Valley Bank will tighten credit conditions and hurt growth. The Fed over the past year has embarked on one of its most aggressive rate hiking cycles in decades to defeat inflation, and has forecast borrowing costs will remain around current levels to the end of 2023. But market participants believe tighter monetary policy is already starting to hurt growth and are betting on rate cuts later this year.When looking at that curve inversion in light of recent declines in economic indicators and money supply, “it’s not hard to see why markets may be increasingly thinking ‘policy error’ when reading about further rate hikes,” Citi’s analysts said.Continuing its inflation-fighting campaign, the Fed last month raised interest rates by a quarter of a percentage point, though it indicated it was on the verge of pausing further increases in borrowing costs after the banking turmoil.Some Fed officials have recently argued for more hikes, with St. Louis Fed President James Bullard saying on Thursday that the Fed should stick to raising interest rates to lower inflation while the labor market remains strong. Money market investors, however, on Thursday were largely betting the Fed would have cut rates by about 70 basis points by December, from the current 4.75%-5% range. “All this tightening of financial conditions, with the Fed raising rates significantly, now it’s morphing into maybe a little bit of a credit tightening,” said Jack McIntyre, portfolio manager at Brandywine Global. “Our conviction level down the road is that rates are going to be lower,” he said. More