May 9, 2008

A top Senate Democrat wants government contractors to stop dodging U.S. tax laws by setting up offshore firms to avoid paying taxes.

Sen. Byron Dorgan, D-N.D., said May 7 he will offer an amendment to the fiscal 2008 emergency Defense Department supplemental to restrict any of the supplemental funds from going to firms that set up offshore subsidiaries to avoid paying U.S. taxes.

“With our troops serving bravely in Iraq and Afghanistan, it is disgraceful that some defense contractors are setting up accounts to dodge their taxes,” Dorgan said in a May 7 statement. The government loses “hundreds of millions of dollars” in taxes because of contractor tax shelters, he said.

“We can right this wrong, however, and put an end to this shameful practice,” Dorgan said.

Houston-based KBR, which holds a multibillion-dollar Army logistics contract, lists its 10,500 employees working in Iraq as employees of two Cayman Island firms that don’t have phone numbers or offices, Dorgan’s statement said. Another logistics and construction firm, IAP Worldwide Services, hires Americans through offshore subsidiaries to avoid paying Social Security taxes, according to the statement.

Current contractors using offshore accounts can continue doing their work, Dorgan said. All they have to do is move their employees on to their U.S. books and pay the taxes, he said.

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