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Tax information of more than 100,000 US citizens stolen via “Get Transcript” service of IRS

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Washington: A group of hackers stole confidential data on more than 100,000 US taxpayers over the past four months, the commissioner of the Internal Revenue Service, John Koskinen, reported.

At a Tuesday press conference, Koskinen said that the hackers accessed tax returns containing a large amount of personal data via the IRS “Get Transcript” service between February and May.

“Get Transcript” is a way to download several years of tax forms when a taxpayer would like to apply for a mortgage or educational financial aid, for instance.

Of the 200,000 attempts by the cybercriminal group to download individuals’ tax data between February and May, about half were successful, but – although an investigation is under way – US authorities still do not know who could have carried out the hack attack.

The IRS chief said the agency is sure that the hackers were not novices. “We’re dealing with criminals with a lot of money and using expensive equipment and hiring a lot of smart people,” he said.

Koskinen said that the aim of the info-pirates was to use personal data they had already stolen from taxpayers to request fraudulent tax refunds in their names, and about 15,000 such refunds were issued.

The IRS will send letters to the 200,000 people potentially affected by the data theft starting this week to inform them of the problem.

According to the agency, the hackers already had acquired – possibly through the social networks – private information, including names, addresses, social security numbers and certain other personal details, on citizens whose tax data they then attempted to steal.

The IRS has temporarily disabled the “Get Transcript” service. Over the past few months, Americans used it to download 23 million transcripts, the agency said, but – for the moment – those requests will have to be filled by sending out paper copies of past tax returns.

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Guest Column: Monetary ‘Teasing’ and Fiscal Expansion

Private Estimates in this regard are between 0.2 - 0.4 per cent shy of the governments estimate

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Fiscal Expansion
Unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. Pixabay

The unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. That said, private estimates in this regard are between 0.2 – 0.4 per cent shy of the governments estimate.

Here are the growth, monetary policy, and bond market aspects of the move:

Growth
With this the government has shown a clear commitment to shore up growth even with its back against the wall, fiscally speaking. Further, it has resisted an easy consumption stimulus which may have had very little multiplier effects and possibly may have eventually contributed to some macro-economic imbalances. Rather, the tax cuts will help improve corporate profits and hopefully improve our global competitiveness. Further, incentives for new units announced may also help with attracting some of the global supply chains reallocations that are underway given escalating trade tensions.

This may, however, not necessarily be a substantial shot in the arm for near-term growth prospects. The tax cuts may be used in a variety of ways, including stepping up investments, reducing debt, cutting product prices, increasing salaries, buyback and dividends, among others.

All told, the immediate pass-through and growth impulses created may be not as strong and thus the tax buoyancy hoped for on the back of stronger growth may have to wait for a while. This is especially true as general competitiveness in an increasingly challenging world requires other aspects of factor input efficiencies to fall in place as well.

Fiscal Expansion
Fiscal policy for fiscal expansion has indeed chosen to step up to the plate, then monetary policy need not be as aggressive. Pixabay

Monetary policy
Prima facie, if, unlike earlier expectation of limited further space, fiscal policy has indeed chosen to step up to the plate, then monetary policy need not be as aggressive, all else being equal. That said, the global and local context is weak enough to argue for yet some (though not substantial) incremental role for monetary easing. This is especially true because RBI Governor Das doesn’t appear to be as large a fiscal hawk, currently (indeed welcoming the bold step from the government, after observing one day prior that fiscal space seemed limited).

We would hence look for monetary “teasing” incrementally, as opposed to “easing” that we were expecting before and would expect the repo rate to bottom out in the 5 to 5.25 per cent area. The one caveat to this view is of further global growth deterioration which would then open up room for further easing, whereas liquidity policy is expected to remain one of substantial surplus.

Fiscsal Expansion
Government has shown a clear commitment to shore up growth even with its back against the wall, towards Fiscal Expansion. Pixabay

Bonds
As noted, before term spreads have been quite wide for this part of the cycle, largely reflecting the inadequate availability of risk capital versus the supply of bonds (the same inadequacy is being reflected as higher credit spreads in the loan and credit market).

Despite more than adequate liquidity now, risk capital has been cautious possibly due to lack of confidence on market risk, given the fiscal and bond supply overhang. Since a large term premium has already existed, we wouldn’t expect a significant further expansion just because the risk has now materialized.

Further we don’t expect the entire expansion to manifest in the Centre’s fiscal deficit. After sharing this with states and accounting for other levers built in, we are looking for a final fiscal deficit of 3.7 nper cent versus the 3.3 per cent budgeted. This will entail some additional bond supply eventually, but with the cushion that the Centre’s net bond supply was slated to fall substantially in the second half of the year versus the first.

Portfolio Strategy
With the prospects of monetary easing somewhat diminishing in incremental intensity, and accounting for the somewhat higher bond supply, we may expect some amount of curve steepening going forward. This may likely happen as market participants anchor themselves to 3 thoughts: One, liquidity will remain abundantly surplus. Two, repo rate is here or modestly lower. Three, prospects of a very large bond rally are somewhat diminished (although this view will evolve going forward depending also on how much net additional supply actually manifests for local absorption) . This will likely increase appeal for the front end of the curve versus the longer duration, hence creating steepening pressure.

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Reflecting the above thought, we have cut our recent duration elongation into the 10-14 year segment and are now refocussing on being overweight 5-7 year for government bonds in our active duration funds. For AAA corporate bonds, the relative value continues in up to 5 years. These segments could better align to what remains an environment of abundant surplus liquidity, a very attractive term spread, still general lack of credit growth, and continued global monetary easing. (IANS)