Barbeau, Evans & Goldstein – Law Blog

A leading law professor [William D. Andrews] wrote a quarter-century ago that deferral of gain “is not as serious as outright exemption, but it is the next best thing.” Few tax law academics would disagree. But how important is tax deferral in the real world, particularly with respect to the Fortune 500 companies and other publicly held corporations, on which I focus and refer to as “Corporate America”? In this Article, I propose that tax exemption and tax deferral are worlds apart. Tax law views tax deferral as a significant benefit for a corporation. Even if tax rates remain constant over time, there is a time value of money benefit in deferring the payment of taxes. But in an accounting analysis, tax deferral appears, on many occasions, to confer only minor benefits. Exclusions (and deductions that are equivalent to exclusions, such as the manufacturing deduction) create the “permanent differences” that are a much greater benefit to Corporate America. Permanent differences can increase a corporation’s net income and therefore its earnings per share—factors that buoy a stock’s price—while at the same time reducing a corporation’s effective tax rate. In contrast, tax deferral items, which produce temporary differences for financial accounting purposes, do not immediately increase a corporation’s net income or its EPS, and also do not reduce a corporation’s effective tax rate. The primary benefit of temporary differences, which may not be applicable in all cases, is to temporarily increase a corporation’s cash flow—a feature that while certainly not unimportant, is not seen as significant a benefit to corporate management as increasing the corporation’s net income or EPS.

TORONTO — Canada’s privacy commissioner accused Facebook on Thursday of breaching Canadian law by keeping users’ personal information indefinitely after members close their accounts.

Privacy Commissioner Jennifer Stoddart released a report that also accuses Facebook of disclosing personal information about users to the nearly 1 million third-party developers worldwide who create Facebook applications such as games and quizzes.

The popular Web site lacks proper safeguards to prevent these developers from seeing users’ profile information, the report said.

Privacy has been a central, often thorny issue for Facebook because so many people use it to share personal information with their friends and family. As the 5-year-old social networking service has expanded its user base and added features, its privacy controls have grown increasingly complicated.

The Palo Alto, Calif.-based company said earlier this month that it was overhauling its privacy controls in an attempt to simplify its users’ ability to control who sees the information they share on the site.

To make the settings easier, Facebook said it would consolidate its existing six privacy pages and more than 30 settings onto a single privacy page. It will also standardize the options for each setting so the choices are always the same, something that hasn’t always been the case.

“It’s clear that privacy issues are top of mind for Facebook, and yet we found serious privacy gaps in the way the site operates,” Stoddart said in a statement, adding that understanding Facebook features can be confusing.

For example, the “account settings” page describes how to deactivate accounts but not how to remove personal data from Facebook’s computer servers. She wants Facebook to remove personal data in deactivated accounts after a reasonable time.

Stoddart calls for more transparency to ensure the site’s 12 million Canadian users have the information they need to make decisions about how widely they share personal information.

The privacy commissioner will review Facebook’s actions after 30 days to gauge progress. She can take the case to the Federal Court of Canada to have her recommendations enforced.

Facebook declined interview requests Thursday, but issued a statement reiterating it was working on new privacy features that it believes “will keep the site at the forefront of user privacy and address any remaining concerns the commission may have.”

The company also said it would continue to work with the commissioner’s office and raise awareness about its privacy controls.

The privacy commissioner launched the probe of Facebook in response to a complaint last year from the Canadian Internet Policy and Public Interest Clinic at the University of Ottawa.

Facebook said Wednesday that 250 million people around the world are now using the site.

The European Commission is considering the adoption of the International Standards on Auditing of the International Auditing and Assurance Standards Board for statutory audits required by Community law. A consultation paper addressing this is available on the EC Europa website (PDF). Consultation ends of 15 September 2009.

The prime minister has announced the creation of the UK Innovation Investment Fund. This fund is to invest in technology-based businesses, focusing on small businesses, start-ups and spin-outs. The Government hopes this scheme could leverage enough private investment to raise £1 billion over the next ten years. This fund is part of the Government’s Building Britain’s Future strategy.

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