More great moments from the annals of aggressive accounting.
Yesterday’s New York Times has an excellent story which I imagine would only have been written in quite this way in the post-Enron era.
The article describes the new hot trend financial advisors are pitching to major corporations. Incorporate a shell parent company in Bermuda and cut your corporate income taxes by millions of dollars.
Here’s an example from the article …
Becoming a Bermuda company is a paper transaction, as easy as securing a mail drop there and paying some fees, while keeping the working headquarters back in the United States.
Bermuda is charging Ingersoll- Rand just $27,653 a year for a move that allows the company to avoid at least $40 million annually in American corporate income taxes.
The company is not required to conduct any meetings in Bermuda and will not even have an office there, said its chief financial officer, David W. Devonshire.
“We just pay a service organization” to accept mail, he said.
How nice for them.
The reaction from the Bush administration is telling.
The White House has said nothing about these moves and their effect on tax revenues. Mark A. Weinberger, chief of tax policy in the Treasury Department, said the moves to Bermuda and other tax havens showed that the American tax system might be driving companies to make such decisions. “We may need to rethink some of our international tax rules that were written 30 years ago when our economy was very different and that now may be impeding the ability of U.S. companies to compete internationally.”
Let’s focus on the key line here: “the American tax system might be driving companies to make such decisions.” This is the rich man’s version of the argument which holds that inner-city hoodlums shouldn’t be held to account for mugging old ladies because of limited job opportunities in the ghetto and persistent underfunding of Headstart.
This is the sort of story, the sort of muck that could fuel a potent new movement for reform. Not one that would demonize big business as such, but one which would steel our collective resolve that taxes shouldn’t simply be a burden which middle-income suckers are forced to pay while big corporations devise clever schemes to dodge them.
This is about equity and patriotism.