- The Washington Times - Monday, May 26, 2003

Companies that cut their U.S. tax bill by incorporating overseas did $1 billion worth of business with the federal government last year, an Associated Press analysis of federal contracts shows.

Critics say that companies that leave the United States to avoid paying taxes should not win lucrative contracts with agencies like the new Homeland Security Department.

Advocates for these companies say high U.S. taxes are putting businesses at a competitive disadvantage to their foreign counterparts.

The Bermuda-based consulting company Accenture Ltd., a spinoff of the former Big Five accounting firm Arthur Andersen, was the biggest federal customer. It received $662 million in contracts between Oct. 1, 2001, and Sept. 30, 2002, mostly from the Transportation Security Administration.

The engineering firm Foster Wheeler Ltd. received $293.2 million. Ingersoll-Rand Co. Ltd., which boasts that its equipment helped carve Mount Rushmore, received $7.6 million.

During the federal fiscal year that ended in September 2001, companies with offshore headquarters received $846 million in federal contracts, according to the House Ways and Means Committee’s Democratic staff.

“It’s outrageous that we would do business with these folks,” said Rep. Richard E. Neal, Massachusetts Democrat, who has introduced legislation to continue taxing companies that move their headquarters overseas. “They are shirking their citizenship.”

The process is known as corporate inversion: A company moves its headquarters — sometimes nothing more than a post-office box — to a low-tax enclave such as Bermuda or the Cayman Islands while leaving its operations and employees in the United States.

The Senate twice has passed legislation to prevent the new Homeland Security Department from doing business with companies that relocate overseas, but both times the provision was removed from the final bill by House Republican leaders.

Jonathan Grella, a spokesman for House Majority Leader Tom DeLay, Texas Republican, said the issue should be addressed as part of an overhaul of the tax system. Republicans have blamed high U.S. taxes for the problem.

Corporations that have moved overseas spent $5 million to lobby Congress and the federal agencies and donated $1.2 million to campaigns in 2001 and 2002, according to an AP analysis of data from Political Money Line, an Internet site.

To fight legislation restricting their ability to move offshore, the companies have assembled an all-star team of lobbyists, including former Sens. Slade Gorton, Washington Republican, and Dennis DeConcini, Arizona Democrat; former House Ways and Means Committee Chairman Bill Archer, Texas Republican; and former House Appropriations Committee Chairman Bob Livingston, Louisiana Republican, according to disclosure forms filed with the House and Senate.

Company officials say the tax breaks that result from moving their headquarters overseas keep them competitive.

“We felt that American companies, based upon the tax laws that are written today, are clearly put at an economic disadvantage to foreign companies,” said Victoria Guennewig, a spokeswoman for Cooper Industries Ltd., a company that makes electrical products and tools.

It moved from Houston to Bermuda in 2002 and received $3.6 million in government contracts last year.

Lawmakers estimate corporations that have moved to low-tax countries avoid $4 billion a year in taxes.

“People should be screaming to the rafters about the hypocrisy involved in corporations moving offshore and then coming back to the taxpayers for a handout in the form of government contracts,” said Charlie Cray, director of the campaign for corporate reform at Citizen Works, an advocacy group affiliated with consumer advocate Ralph Nader.

Ingersoll-Rand spokesman Paul Dickard said preventing companies such as his from seeking government contracts would hurt the company’s 26,000 U.S. workers.

“They’re not necessarily hurting the company as much as they’re hurting U.S.-based employees,” Mr. Dickard said. “That would be unfortunate.”

One of the Homeland Security Department’s agencies, the Transportation Security Administration, gave Accenture a contract of close to $515 million to handle human resources for the agency’s employees, including administering health insurance, life insurance and retirement benefits.

Accenture, which began as the consulting arm of Chicago-based Andersen Worldwide, said the company shouldn’t be included on a list of corporate expatriates because it never was a U.S.-based corporation.

But House Democratic lawmakers and others who want to change the law disagree.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times is switching its third-party commenting system from Disqus to Spot.IM. You will need to either create an account with Spot.im or if you wish to use your Disqus account look under the Conversation for the link "Have a Disqus Account?". Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide