GAO: Tax haven companies have federal contracting edge

A federal watchdog agency has concluded that companies incorporated in overseas tax havens are likely to hold a competitive advantage over domestic competitors in pursuing federal contracts.

The report, International Taxation: Tax Haven Companies Were More Likely to Have a Tax Cost Advantage in Federal Contracting, released today by the Government Accountability Office, examined the tax status of large "tax haven contractors" and compared them to large domestic contractors in 2000 and 2001.

"In both years, tax haven contractors were about one and a half times more likely to have no tax liability as domestic contractors," the GAO concluded.

Sen. Susan Collins, R-Maine, chairman of the Senate Governmental Affairs Committee, first requested the GAO investigation in April 2003.

"I am pleased that the GAO has documented what many of us suspected?that there is an unfair playing field between U.S. companies and corporate inverters when it comes to federal government contracts," Collins said in a statement. "American companies should not suffer a competitive disadvantage because tax haven contractors have inverted ownership to gain an unfair edge by avoiding paying corporate tax."

A spokeswoman for the committee said that Collins is planning to hold a hearing on the issue, but it has not yet been scheduled.

The question of tax haven companies having an advantage over domestic firms in competing for federal contracts was an issue earlier this year, when Accenture LLC, a Bermuda-based company, won U.S. Visit, a multiyear, multibillion-dollar contract awarded by the Homeland Security Department, beating out two U.S. companies.

Accenture was one of four companies out of the 100 largest federal contractors identified by the GAO in an October 2002 report as having incorporated offshore as a way of lowering corporate taxes.