Posted on 07/05/2004 2:49:03 PM PDT by phil_will1
A recent United States Federal Government report produced by its General Accounting Office (GAO) shows that the Cayman Islands is home to subsidiaries of more than 150 US corporations, leading to criticism from officials in that country.
Twenty-four of the 100 largest contractors with the US Federal Government, including Altria Group, Oracle and Procter & Gamble, have subsidiaries in the Cayman Islands according to report by the GAO, the US Congress's investigative arm.
Those 24 companies received a total of $35 billion from the US government in 2001, the GAO found.
"They are shortchanging our country even as they profit from it," said Senator Byron Dorgan, a Democrat from North Dakota, in an article in the New York Post.
Oracle spokeswoman Deborah Lilienthal said the database software maker's Cayman subsidiary owns a minority share of a foreign company she declined to disclose.
Procter & Gamble spokesman Douglas Shelton said the household goods maker's Cayman subsidiary is an inactive holding company.
"We're currently exploring dissolution of that entity so it doesn't raise questions in people's minds," he added.
The 100 US contractors own 464 subsidiaries in offshore tax havens, according to the GAO report. The offshore subsidiaries often serve the sole purpose of allowing companies to avoid paying US taxes, said Senator Carl Levin, a Democrat from Michigan.
"Many (offshore subsidiaries) are little more than a post office box set up to allow corporations to move profits to the low-or-no-tax havens rather than reporting that income in the United States," he added.
JP Morgan Chase & Co estimated in a June study that $650 billion of profit earned abroad by US companies over decades had never been taxed by the US. That's up from a cumulative total of $500 billion cited by JP Morgan in a study a year ago.
In 2001, almost half of the money US companies earned money outside of that country - 47 percent - was accounted for in offshore tax havens such as the Cayman Islands, which has no corporate income tax, said Martin Sullivan, a former US Treasury Department economist, citing Commerce Department data.
As a result, companies didn't have to pay the 35 percent US corporate income tax. Sullivan said his research shows the Cayman Islands is being used for US tax avoidance.
Coca-Cola, the world's largest soft-drink maker, manufactures syrup in two Irish plants owned by Coke's Cayman-based subsidiary, Atlantic Industries. Coke, based in Atlanta, saved $500 million in US taxes last year by earning 63 percent of its income through foreign subsidiaries, according to its 2003 annual report.
Intel, the world's biggest computer chipmaker, uses a Cayman subsidiary to run plants in Ireland, which has a 12.5 percent corporate income tax. Intel, using its offshore units, avoided $792.6 million in US taxes from 2001 to 2003, according to SEC filings.
Based in California, Intel did not deny why it uses a Cayman subsidiary. "I can only assume it's for tax purposes," said company spokesperson Chuck Mulloy in a Bloomberg News article.
Forty-five percent of US corporations with revenue exceeding $50 million or assets of more than $250 million paid no federal income tax in 2000, according to another GAO study. That has increased each year since 1996, when it was 33 percent, the GAO found.
Parmalat, the Italian food company that collapsed in December after telling investors it had lied about its finances, used three Cayman subsidiaries to misrepresent assets, according to Italian prosecutors.
Enron used 441 Cayman affiliates to help hide $2.9 billion in losses, US Senate investigators said.
Reminds me of Claude Rains in "Casablanca" who said he was "shocked" that there was gambling going on in the casino.
Tax reform bump
Maybe if there were no corporate tax, they wouldn't leave.
Oh wait, that defeats the purpose of having them here.
Those corporations should be declared as 100% foreign and IMPORT TAXES levied against them and all their products.
We don't need to provide welfare for ILLEGAL aliens - this includes alien corps!
Apparently these guys never heard of FISCS, foriegn sales corporations that must be set up off shore to facilitate use of US government law promoting tax savings on foreign sales.
The Cayman Islands are a favored location because they are close. There are many others, all are for compliance with IRS regulations. These FISCS have been under fire for years because other countries, most notably the French think they are unfair trade practices.
With that said, corporations should not pay income taxes in the first place. Nor should they collect any for the gov't.
I wouldn't be too quick to condemn these companies. There's lots of European money invested in the US precisely because the US has lower tax rates.
Maybe if there were no corporate tax, they wouldn't leave.
Heck change how the federal government taxes to a retail sales tax only and half the world's businesses are likely to show up in our backyard, can't let that happen:
Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
And here we still sit. Disgusting.
"The IRS has created more liars than fishing and golf combined."
--Will Rogers
A Taxreform bump for you all.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25, S.1493
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information: http://www.fairtax.org & http://www.salestax.org
"I wouldn't be too quick to condemn these companies. There's lots of European money invested in the US precisely because the US has lower tax rates."
I'm NOT condemning the companies; I'm condemning the legislators who write the laws that provide the incentives for companies to do this and then criticize them for taking advantage of the system that THEY set up!
THe issue isn't the rate of corporate taxation, as I understand it. The US is one of a very few countries around the world that insists on taxing US based corporations on their world-wide income. I read the other day that the only other country that does that is Uganda, or something like that.
The purpose of having corporations here is for them to pay tax?! Ehhhh???
I think their purpose is to make a profit. As a by product of profit, they employ people.
No, the purpose of having business in America isn't to collect tax. Business doesn't pay tax anyway... business only recovers tax costs, like any other cost, by increasing prices, reducing wages, or lowering ROI.
It is the goal of business to mazimize profit- and that goal is obviously served by reducing expenses of all kinds - including tax expenses to include income tax, payroll tax, and compliance costs.
I try to take all my legal deductions when I file...why shouldn't business do the same??
The problem is the tax system. Plain and simple.
I was speaking from their point of view.
Liberals think Corprorations exist to pay taxes and provide jobs.
Conservatives understand that Corporations exist to make a profit for its owners.
Corporations are associations of shareholders. They are all ultimately owned by individuals, with the exception of shares owned by foundations and governments.
The only things to tax are you and me. Increase taxes on any legal entity, and you and me pay.
How 'bout if Congress didn't tax them so much and they come back here on their own. You know, the old honey and vinegar story. They are outside the US because the financial climate is better somewhere else for them, the same reason I don't live in Hawaii.
Phew! I thought you were, well, socialist!
I would agree ONLY if they totally removed the illegal citizens' income tax. It only serves to enslave.
If they want to tax - tax EVERYBODY - that includes Kerry, Kennedy, Bush, etc for spending! That means a sales tax. They can't hide behind their tax shelters etc that way. No more exemptions either - they only go to those that pay the criminal lawyers, politicians, and judges.
The corporations though, merit the income tax. They are not exempt anywhere in the world except here on the USA.
If they have an exemption from a different country, then that "corporation" actually belongs to that country (communist china for example).
Evey tax dollar they cheat on, is one you and I have yo pay.
I've got news for you, every tax dollar they pay, you pay them first so the government can collect it from them. Furthermore it costs that business, and ultimately you through the stuff you buy, another 65cents for every dollar of tax collected through those businesses.
Ain't it nice to know, that they got you at the backend while you are filing to pay at front end too?
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
Don't jump to the conclusion that these guys are "unfair tax evaders".
Remember, these companies are ALREADY paying taxes on all their income that they make in foreign countries. What they are avoiding is paying income taxes AGAIN to the US government on that income -- something that no other country requires of their corporations.
The law is broken. That's why these companies have to jump through hoops to just get back to a level playing field with other countries. Fix the law and these subsidiaries would close up instantly.
By the way, I suspect that if they DIDN'T do this, they would also be subject to criminal prosecution under Sarbanes-Oxley because they are not looking out for their shareholders' investments to the greatest degree possible.
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