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US Senate To Send Investigators To The Cayman Islands

by Mike Godfrey, Tax-News.com, Washington

07 June 2007


As part of Congress's ongoing offensive against tax havens, Senate Finance Committee leaders have asked the Government Accountability Office (GAO) to investigate the five-storey Ugland House building in the Cayman Islands, which acts as the registered office for thousands of companies, and to evaluate the associated US tax compliance implications.

The Finance Committee said that it hopes to use the GAO’s findings to gain a greater perspective on the problem of offshore tax evasion as a whole, which was the subject of a May 3rd Committee hearing.

“As the global economy grows, so do its complexities, and that makes it increasingly difficult to track transactions that are legally subject to taxation. I want the GAO to go looking in one of the most likely places shady tax transactions could be sheltered, and that’s this building in the Caymans,” commented Sen. Max Baucus (D-Mont.), committee chairman.

“We need to make sure American companies have access to healthy foreign trade, and at the same time make sure honest American taxpayers are not footing the bill for corporations that aren’t paying their fair share. If American companies are setting up shop at the beach just to avoid their tax obligations, we can’t keep our heads in the sand," added Baucus.

Chuck Grassley, the committee's ranking member, observed that: “Americans benefit from a global economy. We need to strike the right balance between allowing Americans to benefit from the global economy and policing the evasion of US taxes."

"The Ugland House office building in the Cayman Islands has been the source of much debate on the Senate floor over the past few years. It’s time the Finance Committee found out what’s really going on there," stated Grassley.

Ugland House is home to an international law firm and is listed as the registered office for a number of entities that are organized in the Cayman Islands. According to the Senators, 12,748 companies are registered there.

In a letter to David M. Walker, US Comptroller General, Baucus and Grassley wrote: "In order to help this Committee understand the significance of the offshore corporations, we would like to learn more about what is happening in this particular location — the Ugland House. Specifically, we request that GAO travel to the Cayman Islands and visit the Ugland House to determine what sorts of transactions are being conducted in that building."

"We are concerned that US taxpayers are creating offshore business entities solely to evade their US tax obligations, seeking to confound IRS collection efforts by obscuring the true ownership of American assets or income," the Senators told Walker.

The GAO has been authorized by Baucus and Grassley to have access to "the necessary taxpayer information" under the Internal Revenue Code, but conceded that the GAO "may be limited in its ability to obtain information in the Cayman Islands".

A comprehensive report in our Intelligence Report series examining offshore confidentiality is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report1.asp

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