While much of the focus of the BP oil spill has rightfully been on the families, the environment and the businesses affected, it has also allowed another example of a bad corporate actor to rise to the surface. The company that owns the Deepwater Horizon, Transocean, Ltd., is practically a poster child for how a company can work our tax system simply by changing its address.
Transocean has been crossing the ocean as many times as it needs to in order to save money and shirk paying taxes. After transporting itself from Texas to tax-friendly Delaware, it made the voyage across the Caribbean Sea to the infamous Cayman Islands where it partnered with one of 18,000 companies to reside in the infamous Ugland House. Transocean then continued its transatlantic journey to land in the low-tax high-hills of Switzerland.
During its first reorganization, Transocean admitted that the move to the Cayman Islands was to decrease their taxes, as evidenced by their Securities and Exchange Commission filing:
In particular, we believe that the reorganization: Will give us greater flexibility in seeking to lower our worldwide effective corporate tax rate.
The filing goes on to cite the lack of taxation on profits, capital gains, and income, among others, as key benefits to its new Cayman Island address.
Then, a few years ago, Transocean "moved" its headquarters again, this time Switzerland, also to a low-tax jurisdiction, even though it hardly has a presence there, as AP told us last month:
Only a dozen of Transocean's 18,000 employees work in Zug, company spokesman Guy Cantwell told The Associated Press. About ten executives are based in its management offices in Geneva, while the rest are dotted around the world including 1,300 in Houston.
As reported by Bloomberg and in Tax Notes magazine, Transocean has shaved 15 percentage points and billions of dollars off of its U.S. tax bill over the past decade by strategically locating "headquarters" to no- and low- tax jurisdictions.
But did did the U.S. Internal Revenue Service somehow miss the boat?
From Transocean's annual report to the Securities and Exchange Commission for the fiscal year ending 2009, it appears that the IRS did at one time believe Transocean had a significant enough presence in the U.S. to warrant it's paying taxes. It's clear that Transocean thought this would be highly damaging to their "earnings and cash flow" and that their tax rate would increase.
But the report relays that the IRS assessment was withdrawn. It does not give a reason.
It's bad enough that Transocean, BP and others appear to have taken risks and cut corners leading up to the drilling disaster. But to do all of this, and escape paying the taxes that other U.S. companies pay adds insult to injury.
Of course, why wouldn't they take advantage of this system, if all of the countries involved agree that it is copasetic? And Transocean is certainly not alone in its endeavors. In fact, it is one of five Texas oil drilling companies to pick up shop and move their addresses overseas to work the system.
This is a new kind of race to the bottom that America can no longer afford. It's costing us billions.
But even modest proposals by both the Administration and Congress to stop the flow of revenues and jobs offshore have been pounced upon by those who benefit from the current system. It's going to be up to Congress not to cower to these powerful companies - and it's in the public interest to start now.
There are a few in Congress who have been willing to take this issue on. For example, during recent debate on the American Jobs and Closing Tax Loopholes Act of 2010, Senator Byron Dorgan (D-ND) gave a blistering floor speech about these loopholes, at times holding up a photo of Ugland House to amplify his position.
And leaders such as Senator Carl Levin (D-MI) and Representative Lloyd Doggett (D-TX) have proposed legislation to appropriately tax companies such as Transocean that simply change their address to push their tax burden to the rest of us.
While many of these proposals have foundered in the past, the time is ripe to take action on these corporations that have long enjoyed the benefits of being U.S. companies and then change their addresses to shirk their tax responsibilities.
And this loophole tax-leak is only the tip of the plume. Oil pipeline companies, like BP for example, are avoiding paying billions in taxes even as they hike consumers' bills... supposedly so they can pay the very taxes they are shirking.
So much has already been asked of those on the Gulf Coast. Can we continue to also ask those citizens, along with the rest of U.S. taxpayers, to take on an additional tax burden as well? America can't afford to keep looking the other way as companies abandon ship when it comes to paying their share of taxes.
Sign up for Peacock
to stream NBCU shows.
