Bermuda Attracts More Unwelcome Attention In US Tax Debate

by Mike Godfrey, Tax-News.com, Washington

17 April 2003

American companies should not be permitted to avoid paying US taxes just because they have a Bermudian postal address, a senior House Ways and Means Committee member argued last weekend.

Speaking on the Democrats' weekly radio address, Rep. Richard Neal of Massachusetts brought more bad publicity to the island, exacerbating the hysteria surrounding US corporate inversions, which seemingly refuses to die down.

Neal asserted that the practice was bad for America and for its economy, and claimed that such corporate actions would deprive the Treasury of about $4 billion over the next decade.

The Democrat representative said that a last minute amendment added by Republicans onto an energy bill being pushed through the House this week sought to protect any companies which have already expatriated from punitive action by the US government.

Neal used the example of the embattled Tyco Corporation to back up his argument. He claims that the company saved $400 million in taxes by being based in Bermuda, despite having been awarded a $182 million defence and security contract by Congress.

Tyco has, however, pointed out on a number of occasions that its Bermuda domicile resulted from its being taken over by an existing Bermudan corporation with predominantly foreign shareholders. Republicans who defend the behaviour of companies relocating to Bermuda argue that the problem lies with the US tax system which handicaps US-based international companies, forcing them to relocate in order to compete effectively.

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