No more shams in the Caymans

The US Senate has unanimously passed legislation preventing US taxpayer money from going to companies that renounce their American citizenship to avoid paying US taxes.

Co-sponsored by Senator Harry Reid (D-NV) and Senator Paul Wellstone (D-MN), the amendment would bar the Department of Homeland Security from awarding lucrative government contracts to companies that reincorporate in offshore tax havens to sidestep US tax payments.

‘These corporations have turned their backs on their country in our hour of need, but they still come to Congress with outstretched hands asking for rewards,’ said Reid. ‘They want the benefits of American citizenship, while other people shoulder the tax burden. If their headquarters are attacked, they’ll look to American troops for help – not the Bermuda navy or the Cayman Islands air force.’

Under current law, if US companies incorporate offshore, they can avoid paying taxes on their foreign profits. Dozens of major US corporations have set up sham ‘headquarters’ in tax havens like Bermuda or the Cayman Islands while moving almost none of their operations outside the United States. Reid’s legislation would prevent corporations that use this loophole from getting US homeland security contracts.

‘These corporate expatriations are technically legal, but there’s no reason why the US government should reward them,’ says Reid. ‘If corporations want Homeland Defence contracts, they should come home. If not, they should go lobby Bermuda – and leave us alone.’

In a speech on the Senate floor, Reid mentioned a company called Ingersoll-Rand as an example of the problem. The company was founded in 1905, and was based in New Jersey for decades. It manufactures heavy equipment, and even promotes the fact that its jackhammers created Mount Rushmore. Last December, just three months after the September 11 terrorist attacks, Ingersoll-Rand abandoned its US status. The company filed new incorporation papers and set up three employees in a tiny office in Bermuda – and will therefore avoid paying about $40 million a year in US taxes. However, Ingersoll-Rand still holds tens of millions of dollars in government contracts, and it is currently lobbying the US government to buy its airport security screening devices.

Reid’s measure has been added as an amendment to the Homeland Security Act (HR 5005) that is now being debated in the Senate. Similar legislation has already passed the House.

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