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May 23, 2008
Offshore Shell Companies for Defense Contractors Targeted
Offshore shell companies used by defense contractors to skirt Social Security and Medicare taxes for employees may get whacked in the future by new legislation sent to the White House Thursday. The practice is especially popular with contractors doing business in Iraq and Afghanistan -- including KBR, which has "avoided hundreds of millions of dollars in payroll taxes for 10,000 American employees in Iraq by hiring them through shell companies based in the Cayman Islands."
KBR has the single-biggest contract with the U.S. government, worth $27 billion, for troop support. It also has two Cayman subsidiaries, Overseas Administrative Services and Service Employees International, that employ U.S. citizens to work in Iraq, according to a letter to KBR from Rep. Henry Waxman, chairman of the House Oversight and Government Reform Committee.Here's the story: Senate OK's bill barring contractors from avoiding tax
Here's my take from four years ago: Iraq Contractor Accused of Offshore Shell Game
One study, made public in February, finds that 59 of the 100 largest federal contractors in 2001 reported having subsidiaries in approximately 39 countries identified as tax havens. Such countries, including the Cayman Islands and Cyprus, levy negligible taxes on corporate income and provide privacy laws that shield businesses from international scrutiny.Many of the federal contractors named by GAO also hold multi-million dollar contracts in Iraq, including Fluor, Foster Wheeler (which is incorporated in Bermuda), Computer Associates International, Bearing Point, Harris, and others. (A separate GAO report released in August found that such companies enjoy a substantial competitive edge in winning contract awards over government contractors without such offshore operations.)
Houston-based Halliburton, the largest contractor in Iraq, holds billions of dollars in reconstruction and logistics contracts. It operated 17 subsidiaries in tax haven nations as of 2001, according to GAO.
Posted by davidphinney at May 23, 2008 01:06 PM
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