Business and Finance

One in eight people earning at least $1 million annually was audited by the Internal Revenue Service last year, making them far likelier to be examined than those making below $200,000, according to IRS data released Thursday.

Just 1 in 100 individuals earning less than $200,000 had their income tax returns examined, the IRS said.

The 12 percent of millionaire earners audited in 2011 was appreciably higher than the 8 percent who were audited in 2010. IRS officials said the high ratio was part of an effort to demonstrate that tax laws are applied fairly.

“That has been something we’ve concentrated on to assure that there’s equity in the system, to assure that those at the lower end of the spectrum know that those at the higher end of the spectrum are subject to the same rules and enforcement as everyone else,” Steven Miller, deputy IRS commissioner for services and enforcement, said in an interview.

In recent weeks, President Barack Obama and congressional Democrats have sought to boost taxes on the wealthy as a way to pay for jobs programs, a theme they are expected to continue in this presidential and congressional election year. IRS spokeswoman Michelle Eldridge said the growing portion of millionaire earners’ returns audited is not related to politics.

“The IRS is an agency of civil servants, and we base our audit decisions on tax issues _ nothing else. We don’t play politics here,” she said.

Between 2004 and 2009, the percentage of millionaire earners audited ranged between 5 percent and 7 percent.

The data was divided into only three categories of income: below $200,000, $200,000 and up, and $1 million and higher.

About 1 in 25 people earning $200,000 and more was audited in 2011.

The IRS also audited a greater proportion of large corporations than smaller ones, the data shows.

Last year, 1 percent of corporations with assets under $10 million were audited. Among corporations with assets of $250 million and up, 28 percent were audited.

The IRS said its enforcement efforts to collect all taxes owed _ which include audits, court cases and other activities _ netted $55 billion last year. That is nearly $3 billion less than the previous year, which Miller attributed to a falloff in estate taxes and corporations writing off their losses.

All together, the IRS audited nearly 1.6 million of the 141 million individual income tax returns that were filed. In 2010 _ the most recent year available _ more than 8 in 10 individuals audited ended up paying additional taxes.

The agency collected a total of $2.3 trillion in revenue last year from individuals and businesses, including the $55 billion from its enforcement efforts.

The IRS figures also showed that:

_In 2011, the agency garnisheed wages or seized money from bank accounts 3.7 million times, put liens on property 1 million times and seized 776 pieces of property.

_77 percent of individual returns were filed electronically last year, up from 69 percent in 2010.

_70 percent of callers to IRS taxpayer information telephone lines got through, slightly less than the 74 percent who reached someone in 2010. Miller attributed that to budget cuts to the agency.

_The information IRS officials dispensed over the phone to taxpayers was accurate 93 percent of the time, the same as the previous year.

_The IRS website, http://www.irs.gov, was visited 319 million times in 2011, a slight increase.

The data was presented by federal fiscal years, which begin on the previous Oct. 1.

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Global stock markets opened a risk-filled new year still smarting from a rough 2011, as many exchanges remained closed. German and French stocks rose in light volumes as a a reading of manufacturing activity in Europe improved.

Germany’s DAX closed up 3 percent Monday at 6,075 while the French CAC-40, which ended 2011 17 percent lower, climbed 2 percent to 3,222. Stocks fell in South Korea and closed flat in Taiwan.

Trading was light with the New York, London and most Asian stock exchanges closed.

Investors appeared to be reassured by European purchasing managers survey index numbers that improved in December from November. Activity in the manufacturing sector was up, but at levels that still show a fifth straight month of contraction.

Many of the world’s leading indexes are coming off a down year. Britain’s FTSE was off 5.6 percent by year end, Japan’s Nikkei fell 17 percent to its lowest close since 1982, and the Standard & Poor’s 500 showed zero gain.

Data releases later in the week such as eurozone inflation on Wednesday and German factory orders and U.S. non-farm payrolls on Friday will give traders more grist. The U.S. employment figure is expected to rise by some 150,000 after increasing 120,000 in November.

Markets face an uncertain first quarter as eurozone leaders try to get control of government debt woes that threaten to harm the global economy with another financial meltdown.

Much of the attention in coming weeks will center on Italy, the eurozone’s third-largest economy and the focal point of the eurozone’s struggle to deal with a crisis caused by heavy levels of government debt. Fears of default on those debts mean that bond investors demand ever-higher interest, making it a challenge for the new government of Prime Minister Mario Monti to roll over euro53 billion ($69 billion) in debt maturing in the first quarter cash advance. If a country can no longer borrow affordably to pay off bonds that are maturing, it faces eventual default or a bailout.

Debt woes may be compounded by at least a mild recession over the last quarter of 2011 and the first part of 2012.

In Asia, South Korea’s Kospi, which lost 11 percent of its value last year, closed nearly unchanged at 1,826.37. South Korea’s tech sector move higher, with Samsung Electronics up 2.1 percent and LG Electronics gaining 2.3 percent. Steel giant POSCO slid 1.1 percent and Korea Electric Power shed 1.8 percent.

Taiwan’s TAIEX, which was also open for business Monday, fell 1.7 percent to 6,952.21. Foxconn Technology, the world’s biggest contract electronics manufacturer, which makes iPads and iPhones for Apple Inc., fell 0.9 percent. Personal computer maker Acer Inc. shed 2.3 percent.

The Asian-Pacific region’s major benchmarks, including Japan’s Nikkei 225 index, Hong Kong’s Hang Seng Index and Australia’s S&P ASX 200, were closed.

Last year was one that traders would prefer to forget: most Asian equity indexes closed out 2011 deeply in the red. The Nikkei in Tokyo ended the year at 8,429.45 _ its lowest closing since 1982.

China’s benchmark Shanghai Composite Index, closed Monday, endured a 21 percent loss for the year as the impact of Beijing’s multibillion-dollar stimulus faded and the government tightened curbs on lending and investment to cool blistering economic growth.

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Chinese industrial companies

Federal regulators are blocking Duke Energy’s planned acquisition of Progress Energy to form the country’s largest electric company, ruling the companies haven’t done enough to protect competition in their North Carolina and South Carolina home markets.

The Federal Energy Regulatory Commission had scheduled a Thursday hearing on changes to the merger plans in Washington, but regulators surprised the utilities late Wednesday by rejecting the companies’ solution to protect competition.

The FERC action is likely to delay the merger’s year-end target for completion and could require changes that the companies find unattractive.

A Duke spokesman said the company was reviewing the order. He wouldn’t comment about how it affects Duke’s commitment to the deal.

Jefferies & Co. analyst Paul Fremont said the companies’ next move will be to take a serious look at their power plants and decide which can be sold. Any proposed sale must be reviewed by state regulators, who would need guarantees that it wouldn’t affect pre-negotiated power rates for utility customers.

The order will delay the deal by about three months, at least, he said. The companies also may walk away from the deal at this point, deciding that the government was demanding too many sacrifices. “It’s too early to say at this point” what will happen, Fremont said.

The federal agency in September questioned the deal’s impact on customers in North and South Carolina. Regulators suggested that the companies consider a number of measures that would diminish their influence, such as selling power plants, building new transmission lines or giving up control of their transmission system to a regional operator. The companies responded last month with a plan to sell excess electricity at a fixed price to wholesale buyers in their Carolinas territories.

Regulators now say the proposal by Charlotte-based Duke and Raleigh-based Progress doesn’t go far enough.

The “mitigation proposal does not remedy the proposed transaction’s adverse effects on competition,” the FERC ruling said.

Duke first announced it planned to buy Progress in January for $13.7 billion. If approved, the combined company will serve 7.1 million customers in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky.

Duke shares rose 12 cents to $20.97 in premarket trading Thursday while Progress shares added 6 cents to $54.49.

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New polymer banknotes demand that all money-handling machines in the country be upgraded at a cost of $75-100 million, the Bank of Canada estimates.

That compares to $20-30 million for the last conversion in 2004-2006, bank spokesperson Julie Girard said Tuesday.

It sounded like a can’t-miss proposition: Buy the winners, drop the losers.

Developing countries from Brazil to China are expanding much faster than aging economies in the U.S. and Europe, where borrowing during the boom years has been a drag on growth. So the smart money bought stocks in emerging markets, expecting that rapid economic expansion there would provide better rewards. This year, that bet hasn’t worked out.

The broadest measure of U.S. stocks, the Standard & Poor’s 500 index, is down just 0.4 percent this year. Markets in Brazil, China and the like have lagged far behind, even though their economies are still growing faster than the U.S.

“If you were anywhere in the world other than in the S&P 500 this year, you got crushed,” said Greg Peterson, director of research at Ballentine Partners, an investment advisory firm.

The main reason emerging market stocks have suffered deeper losses isn’t because their economies are suddenly sluggish. Analysts say it’s because people have been worried about the European debt crisis and a possible recession in the U.S. It may seem unfair, but when fear of another financial crisis strikes money managers, they tend to flee emerging markets and stay closer to home.

This summer, panicked money managers dropped the most risky investments first. That meant bonds from deeply indebted countries like Italy and Portugal, small companies in the U.S and emerging market stocks got hit the hardest. Even gold, an asset normally considered safe, dropped as traders shifted money into dollars.

“There was a globalization of fear,” says Nathalie Wallace, a senior portfolio manager at Batterymarch Financial Management.

The same thing happened when the U.S. financial crisis hit in 2008. The S&P 500 fell 38.5 percent for the year. But the MSCI Emerging Market index, made up of countries where the banks didn’t peddle subprime mortgage bonds, plummeted 47.3 percent.

“Anytime you see risk and fear coming, you see emerging markets get hit a bit more,” Wallace says. “It doesn’t mean the underlying fundamentals of the economy have changed.”

Consider the collection of emerging-market rising stars known as the BRICs, which stands for Brazil, Russia, India and China. All have economies whose growth exceeds the U.S.

_ Brazil: The economy has expanded 3.1 percent over the past year. The benchmark Bovespa has lost 15.3 percent.

_ Russia: Economic growth of 5.1 percent. The Micex has dropped 11.1 percent this year even after a 10 percent rebound in the past month.

_ India: Economic growth of 7.7 percent. The BSE Sensex index is down 14.4 percent.

_ China: Economic growth of 9.1 percent. The Shanghai Composite has slumped 10 percent this year.

By contrast, the U.S. economy has expanded 1.6 percent over the past 12 months. That’s sluggish compared to the developing world’s stars. And worries that the U.S. could slip into a recession, or that Europe’s debt crisis could tip it into one, have weighed on investors for months. Even after those fears dragged down stocks nearly 20 percent in a month, the S&P 500 outshines indexes in nearly all of the world’s fastest growing economies.

In fact, if you rank the U.S. against emerging markets this year, it places ahead of 20 countries and behind just one, Indonesia.

China and other emerging markets long relied on shipping toys, timber and other goods to consumers in the U.S. and Europe. Trade helped them grow. But that has a downside, says Tim Morris, a portfolio manager at J.P. Morgan’s asset management unit. When a small country hitches its fortunes to U.S. shoppers, it’s bound to suffer when the U.S. economy slows down.

A related problem for many emerging market countries is that they’re dominated by energy and material producers, the type of companies most vulnerable to a global slowdown. Todd Henry, an emerging markets equity specialist at T. Rowe Price, points to Brazil, a country that isn’t as dependent on exports for growth. “It’s a relatively closed economy,” Henry says. “But commodity and energy companies make up a large part of their stock market. So if the world is slowing down, that gets priced in.”

The largest company in Brazil’s stock index is the oil giant Petrobras. When the U.S. economy looks weak, the price of oil falls and the companies that sell oil fall, too. That pushes down Petrobras, which tugs on the Bovespa. In other words, when the U.S. has the sniffles, Brazil’s stock market still catches a cold.

“Americans tend to think our problems are limited to the U.S.,” says Richard Bernstein, chief executive officer of Richard Bernstein Advisors LLC. “But our problems are their problems, too.”

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WASHINGTON

The United States has raised the tempo in its war against al-Qaida in Yemen, killing nine of the terror group’s militants in the second, high-profile airstrike in as many weeks. The dead in the late Friday night strike included the son of Anwar al-Awlaki, the prominent American-Yemeni militant killed in a Sept. 30 strike.

Yemeni officials on Saturday attributed the recent U.S. successes against al-Qaida to better intelligence from an army of Yemeni informers and cooperation with the Saudis, Washington’s longtime Arab allies.

The successes come even as Yemen falls deeper into turmoil, with President Ali Abdullah Saleh clinging to power in the face of months of massive protests. Saturday saw the worst bloodshed in weeks in the capital, Sanaa: At least 18 people were killed when Saleh’s troops fired on protesters and clashed with rivals. Witnesses estimated up to 300,000 people joined Saturday’s demonstrations, the largest in the capital in several months.

“Everyone with interests in Yemen, including al-Qaida and the Americans, is raising the stakes at this time of uncertainty” said analyst Abdul-Bari Taher. “The Americans are wasting no time to try and eliminate the al-Qaida threat before the militants dig in deeper and cannot be easily dislodged.”

Also dead in the Friday airstrike in the southeastern province of Shabwa was Egyptian-born Ibrahim al-Banna, identified by the nation’s Defense Ministry as the media chief of the Yemeni branch of the al-Qaida.

Al-Qaida in the Arabian Peninsula, as the branch is known, is considered by the U.S. the most dangerous of the terror network’s affiliates after it plotted two recent failed attacks on American soil. Its fighters and other Islamic militants have taken advantage of Yemen’s chaos to seize control of several cities and towns in a southern province. That has raised American fears they can establish a firmer foothold in the strategically located country close to the vast oil fields of the Gulf and overlooking key shipping routes.

The U.S. airstrikes in Shabwa pointed to Washington’s growing use of drones to target al-Qaida militants in Yemen. The missile attacks appear to be part of a determined effort to stamp out the threat from the group.

Yemeni officials familiar with the U.S. military drive against al-Qaida in Yemen said a shift of strategy by the Americans was finally yielding results, with human assets on the ground directly providing actionable intelligence to U.S. commanders rather than relying entirely on Yemen’s security agencies the Americans had long considered inefficient or even suspected of leaking word on planned operations.

They said there were as many as 3,000 informers on the U.S. payroll around the country _ some without even knowing it.

The Saudis, on the other hand, have traditionally kept an elaborate patronage system and an information network in Yemen, their neighbor to the south. They have for decades paid monthly stipends to key tribal leaders, military commanders and politicians to secure their loyalty. They also paid ordinary Yemenis to provide them with intelligence.

“The Saudis are making their information available to the Americans,” said one of the defense officials, all of whom spoke on condition of anonymity because they were not authorized to share the information. “Both them and the Americans are broadening their cooperation without direct Yemeni involvement.”

Tribal elders in the area where Friday’s strikes took place said the dead included Abdul-Rahman al-Awlaki, the 21-year-old son of Anwar al-Awlaki, a Muslim preacher and savvy Internet operator who became a powerful al-Qaida recruiting tool in the West and who was on a U one hour payday loan.S. capture-or-kill list. The elder al-Awlaki and another propagandist, Pakistani-American Samir Khan, were killed in the Sept. 30 srike.

The tribal elders, who spoke Saturday on condition of anonymity because they feared reprisals, said four other members of the al-Awlaki clan and another local militant were also killed in the same drone attack. There was no immediate confirmation of the younger al-Awlaki’s death from Yemeni authorities.

Security officials said the strike was one of five carried out overnight by American drones on suspected al-Qaida positions in Shabwa and neighboring Abyan province in Yemen’s largely lawless south. They said two more militants were killed and 12 wounded in other strikes in the two provinces.

The first strike late Friday targeted a house in the Azan district of Shabwa, but hit just after al-Qaida militants had a meeting in the building, security officials and tribal elders said.

They said a second strike then targeted two sport utility vehicles in which the seven were traveling, destroying the vehicles and leaving the men’s bodies charred. It was not clear whether other participants in the meeting were targeted in separate strikes.

Yemen’s al-Qaida offshoot has taken advantage of the political turmoil roiling the country. Saleh, who has ruled the country for more than 30 years, has been struggling to stay in power in the face of eight months of massive street protests demanding his ouster and the defection to the opposition of key aides and military commanders.

In Sanaa, forces loyal to Saleh opened up on protesters with assault rifles and anti-aircraft guns, medical officials and witnesses said. The casualty figures _ 12 dead and up to 300 wounded _ were confirmed by Mohammed al-Qubati, director of the field hospital set up at Change square, the name given to a central Sanaa intersection that saw the birth of the eight-month-old, anti-Saleh uprising.

The medical officials requested anonymity because they were not allowed to speak to journalists.

In Sanaa’s northern district of Hassaba, fighting between Saleh’s forces on one side and anti-regime tribesmen and renegade troops on the other killed two civilians and four supporters of tribal chief Sadeq al-Ahmar, a one-time regime ally who defected to the opposition in March. At least 13 people were wounded in the fighting.

A three-story building housing an independent TV station, Al-Saeedah, in the area took a direct hit, destroying the channel’s equipment and studios, according to a statement by the management. The privately-owned station went off the air.

Khaled al-Ansi, a prominent leader of the protest movement, blamed the death of the proetsters on opposition parties, arguing that their acceptance of a U.S.-backed settlement plan proposed by Yemen’s Gulf Arab neighbors gave Saleh license to kill protesters at will. The plan provides for the Yemeni leader to step down and hand over power to his deputy in exchange for immunity.

“The political parties are participants in the killings,” said al-Ansi. “The immunity from prosecution is giving Saleh a temptation to kill more of us.”

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A prosecutor has asked a federal judge to sentence a New York hedge fund founder convicted of insider trading charges based on illegal gains of more than $70 million.

The prosecutor, Andrew Michaelson, told Judge Richard Holwell (HAHL’-wehl) on Tuesday that he should reject arguments by defense attorneys. They say Raj Rajaratnam (rahj rah-juh-RUHT’-nuhm) made as little as $7 million through his trades.

Rajaratnam is scheduled to be sentenced next week after his conviction earlier this year.

Prosecutors have asked that he be sentenced to between 23 1/2 years and 29 1/2 years in prison. Defense lawyers have urged leniency, in part for health reasons that remain under seal.

Michaelson says the judge should reject defense arguments that Rajaratnam should only be held accountable for trades he made in personal accounts.

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General Motors Co. and the United Auto Workers have reached an agreement on a new contract.

The UAW announced the agreement just after 11 p.m. EDT Friday after several weeks of bargaining. No contract details were released.

The contract covers 48,500 GM workers in the U.S. GM was the first of the Detroit Three to reach an agreement with the UAW. Chrysler Group and Ford Motor Co. are still negotiating.

The UAW says the contract improves health-care benefits for workers and also protects their retirement benefits. It also says there is an improved profit-sharing plan.

Workers must vote on the plan before it will take effect. GM says a vote is expected in the next week to 10 days.

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