Money & Politics
NYSE --- Deb (fast)
>> hello, i’m michael mckee. welcome back to “money & politics.” the big news on wall street today, soaring crude oil prices. crude surged to $70.40 a barrel in new york, up more than $1, to a record close. traders blame concern the dispute over iran’s nuclear program may disrupt shipments and china’s announcement they grew 10.2% in the first quarter, faster than expected. iran’s concerns pushed gold up to $617.18 an ounce, after reaching the highest since december 1980. and fill vertopped $13 an ounce for the first time since 1983, rising to $13.365 after earlier reaching $13.38. the combination of rising oil and metals prices meant falling stocks today -- for more on how oil affected stocks, here’s deborah kostroun at the new york stock exchange. deb?
>> thanks a lot, mike. yes, crude oil surging to that record, closing $70.40 a barrel and what that caused, it caused energy stocks to be among some of the few gainers in the s&p 500. energy, materials, financials among the big winners in today’s session. in fact, what you saw, integrated oil, natural gas, oil services all performing well. but on the converse side, what you did see, stocks falling to their lowest level in a month as crude oil, over $70 a barrel. and the areas of the market hit really hard with crude oil being higher, that’s really the retailers and a lot of those transports and, of course, retailers, they were lower because the thinking is that if people are spending more at the gas pump, maybe they’ll spend less at the retail stores. transports, a direct correlation as many of the transports actually use fuel. the amex airline index, one of the worst individual performers in today’s session. continental airlines, that is actually the top-performing airline stock this year. it was downgraded by lehman brothers after shares exceeding the firm’s 12-month price forecast. lehman also cut estimates on continental because of those higher fuel prices. and financial stocks, a little bit in the spotlight today. they performed actually quite well. a lot of the broker/dealers did well. some of the banks didn’t do so well. citigroup saying first-quarter profit rose to a better-than-expected 3.6% and of course, then, we also have a lot of financial earnings coming out in tomorrow’s session. most notably, merrill lynch and what we’re expecting on merrill, they said back on april 3, they would have a $1.2 billion after-tax charge for changes in accounting and stock award policies which may cut into their net income. back to you in the studio, mike.
>> deborah kostroun, thanks. tyco international today settling fraud allegations against it for $50 million. the securities and exchange commission alleging tyco inflated financial results by more than $1 billion during the tenure of former c.e.o. dennis kozlowski. kozlowski is now in prison after his conviction on charges of stealing from the company and defrauding tyco’s shareholders. tyco shares closing down on the day. for the millions of you who haven’t finished your taxes, you have about 25 minutes left to watch “money & politics” before you have to get back to work. tax returns must be post marked by midnight. we’ll talk with i.r.s. commissioner mark everson right after this break.
点击播报
Listen Interview: Commissioner of the Internal Revenue Service
>> it’s tax day for most of the country. many americans will wait in line tonight to file returns at the last possible moment and if history is any guide, some will try to cheat uncle sam this tax season. it’s mark everson’s job to find and stop them. he’s the commissioner of the internal revenue service. earlier, peter cook asked him how much the government will lose in unpaid taxes.
>> we have the most compliant system in the world. about 84% of what we should get we do get. but nevertheless, 16% of $2-plus trillion, that’s a big number. so each year we are thort about $350 billion that doesn’t come in. it’s a combination of things. underreporting is the biggest piece of it but some people don’t file at all and some people, after they file, they don’t pay.
>> $300 billion or more, as you say, happens to be about the same number as the budget deficit. a lot of people would love to solve the budget deficit problem by collecting those taxes. your view on that, what’s the likelihood we’ll be able to improve that percentage in the coming years?
>> we can do a lot to bring down the tax gap but can’t eliminate it entirely. if you think the way we’d have to change the way the government interacts with citizenry, we’d have to be draconian to get all of that $300-billion. but i think we can get $50 to $100 billion by doing more enforcement at the i.r.s., reforming the tax law. it’s way too complicated. some are confused and some take advantage of the complexity and the third thing that is very important is get more third-party reporting. in the system, for, say, wages, 150 million americans are employees. they get w-2’s and we know how much they earn. if they’re an employee. that noncompliance rate is just 1%. on the other hand, people who organize themselves as small businesses but they’re not incorporated, they get -- there’s an audit rate -- noncompliance rate of miles per one in two. so we proposed extra steps. we want to get credit card issuers to report to the i.r.s. the gross receipts of business customers. we think that will help people comply more.
>> the small business owners who are noncompliant. is that intentional? do you think 50% are trying to cheat uncle sam?
>> there is confusion on some of the standards, depreciation or use of vehicles, for sure. but i do think that the amount by which the income, the gross receipts is understated, and that’s almost $40 billion a year, the tax effect of that, that’s pretty hard to miss that. you get a dollar coming in, that’s a dollar of income that should be reported.
>> let me ask you about overall audits. last year, 1.2 million americans received an audit, a jump from 2000. where do you see that number going this year?
>> we will continue to increase the audits. our area of emphasis is particularly with high income individuals, corporations. but as you say, we stood down on an enforcement after the 1990’s. there was a lot of criticism in the i.r.s. we shouldn’t have done that and in the last several years we brought back enforcement efforts, have doubled the number of audits, more than doubled the number of high-income audits and working aggressively on tax shelters.
>> questions about whether the i.r.s. needs to do more face-to-face audits, talking to americans with questions on their tax returns. is that important?
>> we do face-to-face audits and correspondent audits and the new money we’ve asked for will be dedicated to face-to-face audits but you can get quite an effective return on a correspondence audit, if you see something amiss and contact something, that can be resolved and efficient for both parties.
>> i want to ask you about one area of enforcement. a court recently granted the i.r.s. access to scrutinize paypal’s transactions, the online service there. what exactly are you looking for there? what are you going after when you ask the court for that permission?
>> we have broad efforts to collect information that help us to understand what’s happening in terms of our people entering into abusive shelters or not. and generally when we ask for information, the companies or the banks, they comply. sometimes organizations do not and then we have to go to court. this was a matter which the justice department helped bring that to a satisfactory resolution for us. >> let me ask you about the tax shelter effort you’ve announced, some major investigations, some wrapped up recently. do you anticipate any additional major enforcement actions with regard to tax shelters? >> there are continuing criminal investigations underway, particularly up in new york. we went through a period in this country where the tax shelter industry really was quite untoward and some individuals we count on, attorneys and accountants from blue chip firms, were actually engaging in questionable activity and criminal activity, in a small number of instances, a blot on those professions. we run a system dependent on the goodwill and respect for the law and professionals. the actions that we’ve taken and the justice department has taken, i think it’s bringing that into line.
>> have you filed already?
>> i actually did and got a refund this year. we’re getting new windows in our house and we’ll use it for that.
>> do you think most americans have filed already?
>> the vast majority have already filed. we’ll get another 10 million returns over the next week and then probably about 10 million returns come in after extensions and that runs all the way to october so all told we end up with about 135 million returns filed each year.
>> i.r.s. commissioner mark everson speaking with peter cook. one company in a tax dispute with the i.r.s. is glaxosmithkline. the internal revenue service challenging the company’s tax liability from 1989 to 2000. which could cost billions in back taxes, penalties and interest. glaxo, the world’s second largest pharmaceutical company, is finalizing work on a vaccine against bird flu, currently conducting tests. earlier, i spoke with glaxo chief executive dr. jean-pierre garnier about both subjects. i first asked him how promising is the company’s h5n1 vaccine?
>> it’s very promising. we’re finishing the clinical trials as we speak. we should have a vaccine ready in the fall if everything goes right. and so far, as you know, this is not our first batch of clinical trials. we worked with this prototype before in a very satisfactory manner and we think we can be ready, we can go into large-scale production by the latter part of 2006. this is very promising.
>> what you say large-scale production, how much can can you make and how quickly?
>> hundreds of millions of dozes in the latter part of the year. but remember, if there is no pandemic, hopefully no pandemic alert, then we’ll have to also, in the same manufacturing facilities, make our flu vaccine, which will take away a lot of the capacity. if there was a dramatic event and an alert for pandemic, we could step up, stop making the regular flu vaccine and instead transfer our capacity to make the pandemic vaccine.
>> one of the issues for making a vaccine is, of course, what exactly the strain will look like, a flu that might turn into pandemic. how easily modified is your vaccine?
>> this is sort of a so-called shotgun vaccine so as long as the virus mutates but stays within the h5n1 family, we’ll be fine. the vaccine is likely to be effective. the problem comes from mutation that would take this virus away from h5n1. so, in other words, those proteins on the surface called h-5 and n1 would disappear. then our vaccine would not be effective, we would have to start from scratch. we would have to first identify the new virus and then scramble and make the vaccine prototype based on the same characteristics as we have done before for flu and pandemic and that would take at least three months so this would be a much more dramatic situation if there was a mutation away from h5n1. but the government sort of playing the odds and saying, well, at least we could cover the risk of mutation within h5n1. let’s hope that happens. if it doesn’t happen, it will be more dramatic and we will have to restart the process from scratch. >> dr. jean-pierre garnier, glaxosmithkline chief executive. stay with us. joe lockhart joins me next.
