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Halliburton Feels Democrat Wrath After Dubai Move

by Leroy Baker,, New York

15 March 2007

A number of prominent Democratic lawmakers in the United States have hit out at Houston-based energy firm Halliburton's decision to transfer part of its operations to Dubai, calling into question whether the firm's true motives for the move are to avoid US taxes, greater scrutiny of its contracts with the US government, or both.

Halliburton announced at a regional energy conference in the Kingdom of Bahrain last weekend that the opening of a corporate headquarters office in the United Arab Emirates was part of its strategy to focus on business opportunities in the eastern hemisphere.

However, the move has raised suspicions among many lawmakers on Capitol Hill, particularly on the Democrat side of the aisle. Speaking at a press conference earlier this week, Hillary Clinton, New York Senator and Democratic presidential hopeful for 2008, said that Halliburton's move "raises a lot of serious issues we have to look at".

"Does this mean they are going to quit paying taxes in America? They are going to take all the advantage of our country but not pay their fair share of taxes?" she asked.

Clinton also expressed concern that if the company re-domiciled to Dubai, investigations into alleged abuse of government contracts may be hindered.

"They get a lot of government contracts - is this going to affect the investigations that are going on? Because we have a lot of evidence of misuse of government contracts. They have taken the money and not provided the services, so does this mean that we won't be able to pursue these investigations? I think it raises a lot of very big concerns and I think we are going to be looking into that in Washington," she said.

Senator Byron Dorgan (D-ND) also issued a statement following the announcement that Halliburton Chairman, President and Chief Executive Officer Dave Lesar will move his office to Dubai, describing the move as "bizarre".

“This is one of the country’s larger defense contractors. It has gotten billions of dollars in defense contracts, many of them no-bid contracts, and has been accused of under-performing and over-billing," Dorgan said.

“I want to know, is Halliburton trying to run away from bad publicity on their contracts? Are they trying to run away from the obligation to pay US taxes? Or are they trying to set up a corporate presence in Dubai so that they can avoid the restrictions that currently exist on doing business with prohibited countries like Iran?" he asked.

Dorgan argued that the issue was sufficiently serious for Congress to hold hearings to determine the true reasons why one of America's major defense contractors has decided to move its principal offices offshore. "What’s behind it, and what obligation should we, as a country, expect from companies like this?” he questioned.

Meanwhile, Charles Rangel, the New York Democrat and Chairman of the House Ways and Means Committee, said he was "not surprised" that Halliburton wanted to move its corporate headquarters to the Gulf emirate, because it wanted to be closer to the source of its profits in Iraq. Nonetheless, he lamented "another sad example of American companies increasingly moving offshore", and has called for changes in tax law to discourage US corporations from following suit.

"I am troubled by the continued outsourcing of jobs and am eager to find out how the tax code can be strengthened to encourage American companies to reinvest here rather than abroad. I hope my friends in the administration, including former Halliburton CEO (vice-President) Dick Cheney, share this goal," he stated.

Sen. Chuck Grassley (R - Iowa), ranking member of the Senate Finance Committee has pledged to investigate whether Halliburton will receive any "inappropriate tax benefits" from its action, although he was satisfied that the move to Dubai does not amount to a corporate inversion, whereby companies set up an offshore office to reduce domestic taxes; a transaction outlawed under recent legislation. However, he criticised Democrats for condemning Halliburton on the one hand, while on the other, stalling on legislative proposals that will further inhibit US firms' ability to dodge US taxes through offshore structures.

“It’s interesting that some Democratic House leaders are quick to condemn Halliburton for moving its CEO to Dubai. Meanwhile, those House leaders are slow-walking a Senate-approved package of corporate loophole closers, including a further crackdown on corporate inversions," he remarked.

According to Grassley, companies like Halliburton have been unable avail of inversion tax benefits as a result of the American Jobs Creation Act of 2004, enacted, as Grassley was keen to point out, under his chairmanship of the Senate Finance Committee, in the previous Republican-led Senate.

"You’d think that with all the fuss about Halliburton, the House Democrats would be more reform-minded," was Grassley's parting shot.

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