CRF Blog

Fat Federal Contracts for Tax-Evading U.S. Companies

by Bill Hayes

In Fat Federal Contracts for Tax-Evading U.S. Companies, Bloomberg Businessweek reports that loopholes allow companies that register abroad to avoid U.S. taxes to still get federal contracts.

[T]he law is riddled with exemptions that allow the offshore companies to legally bid for government work. A company that avoids domestic taxes by shifting its address abroad can still be eligible for federal contracts if it has “substantial business” in its new home — thus nominally demonstrating its move wasn’t solely for tax reasons. The rules also don’t cover U.S. companies that acquire foreign addresses, and tax benefits, through takeovers of overseas competitors.

More than 40 U.S. companies have reincorporated in tax havens, a strategy known as inversion, 11 of them since 2012. Seven more are in the process of doing so. [more]