Offshore Firms Won $1 Billion in Federal Contracts Last Year

by Mike Godfrey, Tax-News.com, Washington

28 May 2003

According to an Associated Press analysis of government contracts, US firms incorporated in low tax jurisdictions conducted $1 billion worth of business with federal agencies last year.

According to the AP figures, the largest recipient of government contract awards was consulting firm Accenture Ltd, who won $662 million worth of contracts between October 2001 and September 2002, largely from the Transportation Security Agency. Another notable recipient was engineering firm Foster Wheeler, gaining contracts worth $293.3 million in the same period.

Naturally, these figures have stoked up once more the debate on the ethics of US companies re-incorporating offshore to save on tax. Massachusetts Democrat, Richard E. Neal, who has introduced proposals to tax firms moving their headquarters offshore, accused such firms of "shirking their citizenship" and fumed: "It's outrageous that we would do business with these folks."

Citizen groups, such as the Bermuda Project and Citizen Works, which works closely with consumer advocate Ralph Nader, are also campaigning fiercely to raise public awareness of the 'unpatriotic' activities of firms registering offshore.

"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.

The corporations are not about to give up their right to move offshore easily however, and reports indicate that firms have spent $5 million lobbying congress to retain the status quo. In the process, they have gathered the support of a cross party group of Congressional representatives who are fighting for the firms' interests in Washington.

Some legislators estimate the total cost to the US taxpayer from offshore incorporation at $4 billion. The firms themselves however maintain they continue to flourish and provide jobs for thousands of US workers precisely because the tax benefits allow them to do so. Paul Dickard, spokesman for Ingersoll Rand who won $7.6 million worth of government contracts according to AP, said laws curtailing the company's freedom to incorporate offshore would ultimately only hurt its 26,000 employees in the US. "They're not necessarily hurting the company as much as they're hurting US-based employees," Mr. Dickard said. "That would be unfortunate."

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