US Senator Launches New Attack On Offshore Reincorporation

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

26 March 2002

Speaking at a Senate Finance Committee hearing on Thursday, Republican Senator Charles Grassley launched a stinging attack on US companies which choose to reincorporate offshore in order to enjoy lower taxation rates.

'We ought to be able to expect American companies to have their heart in America. Quite frankly, their heart doesn't seem to be in America and they're getting their rear end out of America, at least for tax purposes,' he told the hearing, referring to the recent 'wave' of companies choosing to perform what are known as corporate inversions.

The rise of the phenomenon was highlighted by a report in the New York Times last month, which named Bermuda as the most popular location for US companies fleeing the strictures of the American tax code. However, the furore shows little sign of abating any time soon, much to the chagrin of Bermuda based US companies such as consulting firm Accenture, toolmaker Stanley Works, and industrial conglomerate Tyco International.

Senator Grassley, who in conjunction with Finance Committee Chairman Max Baucus intends to launch a retroactive bill reducing the tax incentives for corporate inversions after the Easter recess, then attempted to hit one of the fleeing companies where it hurts, holding aloft a Stanley saw, and observing that: 'I hope people will remember this when they shop for the products this company makes.'

Senator Baucus concluded the meeting by praising the ordinary American taxpayers who would be paying their taxes 'with quiet patriotism' on April 15, adding that: 'They're counting on us to make sure sophisticated corporations pay their share too.'

However, the continuing allegations that his country is encouraging 'unpatriotic' behaviour have angered the Bermudian Finance Minister, Eugene Cox. Speaking at the weekend, he hit back, explaining:

'People come here mainly because they want high quality regulation, a solid infrastructure, good communications and a place at the crossroads of Europe and the US. We have absolutely no interest in helping anyone evade taxes.'

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