US Trade Union Chief Calls For End To Offshore 'Exodus'

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

15 July 2002

Speaking last week, US trade union chief, John J. Sweeny slammed the Bush administration for failing to do more than give lip service to efforts to clamp down on companies reincorporating offshore, and corporate accounting scandals.

Speaking prior to the release of House Ways and Means Committee Chairman, Bill Thomas's 'catch-all' tax reform bill, the head of the American Federation of Labour - Congress of Industrial Organizations (AFL-CIO) stated that: 'We must take away the tax incentives that encourage companies to dodge their tax responsibilities by reincorporating in places like Bermuda.'

He also bemoaned the lack of concrete action on increasing corporate responsibility, dismissing the President's recent statements on the issue as 'rhetoric'. The Bermuda Royal Gazette quoted Mr Sweeny last week as announcing that:

'Calls for companies to police themselves are an inadequate reponse to the hundreds of thousands of working families who have lost jobs, pensions, and health care because the companies they worked for lied to their employees, their investors and the public.' He continued: 'The measure now must be the actions the President and members of Congress are prepared to take to close the gaping loopholes in our laws that foster the hijacking of American business by insiders bent on self-enrichment.'

At first glance, Bill Thomas' proposals appear to hit the mark, covering all of the issues raised by the AFL-CIO chief and more.

The all-singing-all-dancing piece of legislation seeks to: defer tax savings from a company's move offshore by five years, crack down on earnings stripping arrangements, ensure that companies pay a tax when they transfer assets overseas, equalize the treatment of corporate insiders and ordinary shareholders by imposing an excise tax on stock options held by officers and directors in the event of a corporate inversion, and impose tough penalties on individuals and companies which fail to disclose their use of tax shelters.

The proposed legislation also repeals the Extraterritorial Income Act (ETI), which has been a bone of contention between the European Union and the US for some time now.

However, Mr Thomas' bill may be too good to be true. It is highly unlikely that such a wide-ranging package of reforms will make it through Congress without substantial alteration, a fact which has led many commentators to dismiss the bill as electioneering, pure and simple.

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