Bermuda Incorporation Becoming 'Mega Trend' For US Companies

by Leroy Baker, Tax-News.com, New York

20 February 2002

The exodus from the United States to the low tax jurisdiction of Bermuda has been labelled a 'mega trend' by tax professionals and advisers, and is starting to concern the Treasury Department, according to a report in Tuesday's New York Times.

Insurance companies led the way, tempted by lower taxes and more flexible regulation, but recent evidence has revealed that manufacturers and other types of US companies are following in their wake. Industrial equipment manufacturer Ingersoll-Rand, for example, recently completed its reincorporation as a Bermudian company, thus saving itself some $40 million annually in US corporate income taxes.

Speaking to the New York Times, Chief of Tax Policy in the Treasury Department, Mark Weinberger, explained that many US companies felt that they were being driven to reincorporate offshore by the country's somewhat outdated international corporate tax system:

'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 US companies to compete internationally,' he explained.

Meanwhile, Republican Senator Charles Grassley has called for a Senate Finance Committee investigation into the rising number of defections, observing that: 'There is no business reason for doing this, other than to escape US taxation.'

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