Accounting

Obscure tax item in Trump’s big bill alarms Wall Street

Published

1 year ago

May 30, 2025

Buried deep in the more than 1,000-page tax-and-spending bill that President Donald Trump is muscling through Congress is an obscure tax measure that’s setting off alarms on Wall Street and beyond.

The item — introduced in legislation that passed the House last week as Section 899 and titled “Enforcement of Remedies Against Unfair Foreign Taxes” — calls for, among other things, increasing tax rates for individuals and companies from countries whose tax policies the U.S. deems “discriminatory.” This includes raising tax rates on passive income, such as interest and dividends, earned by investors who are potentially sitting on trillions in American assets.

Cloaked in technicalities, the implication of the “revenge” measure, as it’s quickly becoming known, is clear to analysts: If signed into law, it would further drive away foreign investors at a time when their once ironclad confidence in Treasury bonds and other U.S. assets has already been shaken by Trump’s erratic trade policies and the nation’s deteriorating fiscal accounts.

“We’re already dealing with a market where Treasuries, to foreign investors, probably aren’t the most attractive investment,” said Michael Brown, a strategist at Pepperstone Group, a brokerage firm founded in Melbourne whose clients are all outside the U.S. Brown said he got so many inquiries from concerned clients that he quickly put together a report breaking down the measure. “If you’re now talking about massively unfavorable tax treatment, then it’s just another reason to stay away.”

Among those potentially affected: institutional investors including sovereign wealth funds, pension funds and even government entities, as well as retail investors and businesses with U.S. assets.

The proposed tax is separate from Trump’s tariff-heavy trade agenda, which is now snarled in court, but the thrust is the same, and its aims align with some of the positions set forth by the economist Stephen Miran in a paper last November and those seeking a so-called Mar-a-Lago global restructuring accord. All seek to address perceived unfair treatment of the U.S. by the rest of the world using targeted tools designed to put the country on a more even footing. But after years of foreign investors piling into U.S. assets, experts fear the consequences of Section 899 may be far-reaching.

The provision amounts to “weaponization of U.S. capital markets into law” that “challenges the open nature of U.S. capital markets by explicitly using taxation on foreign holdings of U.S. assets as leverage to further U.S. economic goals,” George Saravelos, head of FX research at Deutsche Bank AG, wrote in a report on Thursday. “We see this legislation as creating the scope for the U.S. administration to transform a trade war into a capital war if it so wishes, a development that is highly relevant in the context of today’s court decision constraining President Trump on trade policy.”

Section 899 takes aim at countries including Canada, the U.K., France and Australia that impose “digital services taxes” on large technology companies such as Meta Platforms Inc. The clause also targets countries using provisions in a multi-country deal for minimum corporate taxes.

The measure would boost the federal income tax rate on passive U.S. income earned by investors and institutions based in the targeted countries, first by five percentage points, then rising by another five points each year to a maximum of 20 points above the statutory rate.

‘Troubling’ for bonds, dollar

Morgan Stanley’s strategists included the provision in frequently asked questions related to the tax-and-spending bill and concluded that Section 899 would weaken the dollar and European stocks with U.S. exposure. Gilles Moec, the chief economist at AXA Group, said it could add to the pressure on long-term interest rates, which this month touched multiyear highs. Others see it dragging on the U.S. currency.

“It indeed sounds troubling,” said Rogier Quaedvlieg, senior U.S. economist at ABN Amro Bank NV. “By limiting new foreign demand, that would of course put pressure on the dollar.'”

The risks related to the section 899 provision are seen by some as even more pressing after the U.S. court order on Wednesday that blocked many of Trump’s tariffs on imports. Tariffs are considered a key source of revenue to fund Trump’s tax cuts, a signature part of his “big, beautiful bill.” Without them, the question is where the administration will find the money to fund them.

On Thursday, a federal appeals court offered Trump a temporary reprieve from the ruling, and White House officials said they planned to continue defending the legality of their efforts on trade to the U.S. Supreme Court.

The intent of the measure appears similar in spirit to some ideas put forth in November by Miran while he was still working at hedge fund Hudson Bay Capital. Miran, now chairman of the White House Council of Economic Advisers, raised the possibility of imposing “user fees” on foreign investors in Treasuries as one option to help push down the dollar and address global trade imbalances.

“The clause is clearly endorsed by the administration and designed to give Trump a negotiation tool for pressuring countries to drop digital services taxes and global minimum corporate income taxes, which he sees as unfairly targeting U.S. multinational companies,” wrote economist Will Denyer and Tan Kai Xian at Gavekal Research. “The problem is that before Trump has a chance to use the new tool, its very existence may unsettle bond markets.”

“With tariff revenue more uncertain and less likely to offset tax cuts in the GOP budget bill, traders need to be prepared for tax changes on foreign holders, ultimately reducing demand for American financial assets,” said Michael Ball, a Markets Live macro strategist.

For now, the market reaction to Section 899 appears muted, at best. Still, U.S. assets as a whole have been underperformers this year as Trump’s policies put a dent in the narrative of “America exceptionalism.”

The S&P 500 is up about 0.4% this year, compared with a 20% gain in the German benchmark and a 18% rally in Hong Kong. The Bloomberg Dollar Index slumped about 7%. The US Treasuries returned 2%, trailing the 5% gain in the global government bonds in dollar terms, according to data compiled by Bloomberg.

Under the surface

While some are skeptical if the Section 899 would survive on concern it would dampen foreign investment into the U.S., Signum Global Advisors predicts it will likely remain in the final version of the reconciliation package, in part because it has broad Republican support.

“We believe the president’s viewpoint is that there is such immense foreign appetite to invest in the U.S. that it is not at risk of being thrown off course,” according to Charles Myers, a former Wall Street executive who runs advisory firm Signum, and Lew Lukens, a partner at the firm.

To Pepperstone’s Brown, the reason markets haven’t reacted yet is because investors hadn’t fully grasped the significance of the clause. But they’re starting to now.

“It’s only as the dust has settled that people are thinking that maybe there are some things lurking under the surface of the bill we should pay a little bit more attention to,” said Brown. “And I think this section 899, this is probably one of them.”

Accounting

Continuous Auditing Transforms Corporate ERPs

Published

5 days ago

July 21, 2026

Business Finance News

continuous auditing transforms corporate erps

As corporate accounting departments cross the threshold into late July 2026, the adoption of continuous, automated auditing systems has reached a definitive turning point. Driven by advances in artificial intelligence and deep integration with modern Enterprise Resource Planning (ERP) platforms, leading finance organizations are moving away from traditional, periodic post-hoc audits in favor of real-time, 100% transactional verification. This technological transition is redefining internal control environments, reducing compliance costs, and eliminating the structural delays inherent in legacy quarterly closing processes.

Unlike traditional auditing frameworks that rely on statistical sampling—a process that inevitably leaves operational blind spots—continuous auditing software monitors operational data feeds continuously. Every purchase order, electronic invoice, payroll disbursement, and cross-border wire transfer is automatically cross-referenced against established corporate governance parameters, regulatory tax schedules, and anti-fraud algorithms in real time. Anomalies or unauthorized ledger entries are flagged instantly, allowing internal audit teams to investigate and remediate compliance gaps immediately rather than months after the close of a financial period.

The implications for executive financial management are far-reaching. By embedding continuous verification directly into daily transaction workflows, chief financial officers gain uninterrupted visibility into the organization’s true financial standing. Real-time balance sheet auditing eliminates the severe operational bottlenecks associated with month-end and quarter-end financial reconciliations, freeing accounting professionals to focus on strategic financial modeling, tax planning, and capital allocation rather than manual data entry and spreadsheet consolidation.

However, implementing continuous auditing requires accounting leadership to invest heavily in data governance and technical upskilling. Internal audit teams must evolve from manual ledger reviewers into system architects capable of auditing complex algorithms and validating automated data pipelines. Accounting firms and corporate controllers that master continuous auditing will establish a resilient compliance framework capable of meeting stringent international regulatory standards with total transparency.

Accounting

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

Published

6 days ago

July 20, 2026

Business Finance News

U.S. Imposes New 50% Tariffs on Canadian Imports Under Rare Legal Provision

WASHINGTON — In a major escalation of cross-border trade friction, U.S. President Donald Trump has signed executive orders imposing new 50% tariffs on a wide selection of Canadian exports, citing discriminatory practices by Ottawa targeting American auto, dairy, and beverage industries.

The new duties, announced Monday, will take effect in 30 days. They target a broad spectrum of consumer and industrial goods—ranging from wine, liquor, and milk products to commercial cement, furniture, clothing, and hockey equipment.

Untested Legal Mechanism

To enact the sweeping measures, the administration invoked Section 338 of the Tariff Act of 1930—a rarely used legal provision allowing the executive branch to levy additional tariffs of up to 50% on foreign nations deemed to discriminate against U.S. commerce.

White House officials noted that Section 338 addresses trade discrimination rather than national security or economic emergencies. The move comes months after prior global emergency tariffs faced legal challenges in domestic courts, signaling Washington’s pivot toward alternate statutory authorities to maintain import duties.

Senior administration officials briefed reporters that the measure directly responds to Canadian provincial bans on U.S. alcohol, restrictions on American vehicle exports, and import quota disparities affecting U.S. dairy and cheese producers relative to third-party trading partners.

“While the administration continues to secure reciprocal trade agreements globally, Canada retaliated against efforts to protect domestic industry,” U.S. Trade Representative Jamieson Greer stated.

USMCA Impact and Carve-Outs

Significantly, the newly ordered 50% duties will apply to designated items even if they otherwise comply with the United States-Mexico-Canada Agreement (USMCA).

However, the administration confirmed key targeted exemptions:

Energy products (including oil and natural gas)
Potash and critical minerals
Fish and seafood
Goods already governed by sector-specific duties (such as existing steel and aluminum tariffs)

Administration representatives emphasized that the tariffs do not stem from recent disputes concerning drifting Canadian wildfire smoke, noting that policy options regarding environmental spillover remain under separate review.

Canadian Response and Market Reaction

Following the White House announcement, the Canadian dollar experienced a sharp decline against the U.S. dollar, falling approximately 0.4% during evening trading.

Canadian Prime Minister Mark Carney issued a statement emphasizing that Canada’s earlier counter-duties had merely matched previous U.S. trade actions. “Canada stands ready to engage intensively to address outstanding issues with the U.S. to the mutual benefit of our citizens,” Carney stated, pointing to detailed proposals Ottawa submitted to modernize the USMCA framework.

Ontario Premier Doug Ford took a firmer stance, urging a “dollar-for-dollar” reciprocal response if the measures go into effect on August 19.

With a 30-day implementation window before the duties officially lock in, industry associations and trade groups on both sides of the border are calling for urgent bilateral negotiations to avert further supply chain disruption across North America.

Accounting

Automated Continuous Auditing: Transforming Compliance and Real-Time Financial Oversight

Published

6 days ago

July 20, 2026

Business Finance News

Transforming Compliance and Real-Time Financial Oversight

The traditional accounting paradigm—defined by periodic monthly closures and post-hoc annual audits—is rapidly giving way to continuous, automated financial oversight. As of July 2026, forward-thinking accounting practices and multinational corporate finance departments are leveraging continuous auditing systems powered by advanced machine learning models. These systems monitor operational transactions in real time, shifting audit methodologies from sample-based post-analysis to absolute, 100% transaction-level verification.

The operational advantages of continuous auditing are transformative. Standard auditing procedures historically relied on statistical sampling, which, despite rigorous methodology, inherently left gaps where anomalies or fraudulent transactions could go undetected for months. Modern continuous auditing platforms integrate directly with enterprise resource planning (ERP) databases, instantly cross-referencing purchase orders, invoices, bank feeds, and tax records. Any deviation from established control parameters or unusual transaction behavior triggers immediate flags for internal audit teams, dramatically reducing detection lag from quarters to seconds.

Beyond fraud prevention, continuous auditing fundamentally alters internal reporting and decision-making. Executive leadership no longer has to wait weeks after the close of a quarter to evaluate precise financial standing; real-time verified ledger data provides an uninterrupted view of operating margins, tax liabilities, and cash flow dynamics. This real-time visibility enables corporate controllers to adjust capital allocation strategies dynamically, mitigating liquidity constraints and capitalizing on emerging commercial opportunities far more efficiently than competitors bound to legacy reporting cycles.

However, implementing continuous auditing requires accounting professionals to acquire new analytical capabilities. The role of the auditor is evolving from manual data reconciliation toward system validation, algorithmic model governance, and strategic risk interpretation. Accounting firms and corporate finance departments must invest in continuous technical education, ensuring that audit staff possess the data engineering skills necessary to design, maintain, and evaluate complex automated compliance systems.