A five-story office building in the Caymans island serves as the official address for 18,857 corporations

May 5 (Bloomberg) – Seagate Technology, the world’s largest maker of hard disk drives, is headquartered in Scotts Valley, California. Yet the documents it files with the Securities and Exchange Commission list its address on South Church Street in George Town, the capital of the Cayman Islands. Seagate is just one of the companies that may be affected by President Barack Obama’s proposal yesterday to raise about $190 billion over the next decade by outlawing techniques used by U.S. companies in offshore locations to avoid paying taxes. While the U.S. corporate tax rate is 35 percent, Seagate paid an effective tax rate of 5 percent in the year ended June 2008, according to data compiled by Bloomberg. The Caymans have no corporate income tax for companies incorporated there. The Caribbean island has helped scores of U.S. companies, including Coca-Cola Co. and Oracle Corp., to legally avoid billions in tax payments to the U.S. government, says U.S. Senator Byron Dorgan. “Our Main Street businesses are working hard during this economic downturn to pay their fair share of taxes,” says Dorgan, 66, a North Dakota Democrat. “Some of the country’s largest corporations are using these loopholes to avoid paying their fair share of taxes. It is my hope that the Congress will quickly take action to pull the plug on tax breaks that subsidize runaway plants that move U.S. jobs overseas.” Largest Companies One quarter of the 100 largest contractors with the U.S. federal government, including Altria Group Inc. and Tyco International Ltd have had subsidiaries in the Caymans, according to a study by the Government Accountability Office. At least 10 of the 30 companies listed in the Dow Jones Industrial Average have had units with addresses in the Caymans. As of November 2007, 378 U.S. publicly traded companies had at least one significant subsidiary in the Cayman Islands, a GAO study found. Altria, Tyco, Coke and Oracle still have subsidiaries in the Caymans, according to their most recent SEC filings. Seagate lists its headquarters in Grand Cayman. One of the Dow 30 companies using offshore sites to reduce its U.S. taxes is Santa Clara, California-based Intel Corp., the world’s largest chipmaker. Intel’s then vice president of tax, licensing and customs, Robert Perlman told the U.S. Senate Finance Committee in March 1999 that Intel would have been better off incorporating in the Cayman Islands when it was founded in 1968. “Our tax code competitively disadvantages multinationals simply because the parent is a U.S. corporation,” Perlman testified. ‘The Details’ Intel spokesman Chuck Mulloy said yesterday his company is rethinking its tax strategy. “We’re studying the Obama proposal,” Mulloy said. “Particularly with taxes, the devil’s in the details.” Seagate spokesman Brian Ziel said yesterday that his company incorporated in the Caymans to reduce its taxes. “The competitive benefits relate both to taxes saved on certain income earned outside of the United States and the ability to efficiently deploy assets around the globe to remain competitive,” he said. Eighty-five percent of Seagate’s employees work outside the U.S. and more than 70 percent of the company’s revenue comes from sales overseas, Ziel said. “Officially, our administrative headquarters is in the Caymans,” Ziel said. “That’s how it’s listed in our annual report.” 18,857 Cayman Corporations Altria spokesman Bill Phelps said his company is in the process of dissolving its Cayman subsidiary. Coke spokeswoman Kerry Kerr said, “We don’t comment on tax strategies, for competitive purposes.” Tyco’s Paul Fitzhenry and Oracle spokeswoman Karen Tillman didn’t return calls requesting comment. A five-story office building on South Church Street in the Caymans serves as the official address for 18,857 corporations. That building, called Ugland House, is listed in SEC filings as Seagate’s headquarters. About half those Cayman companies had billing addresses in the U.S., according to a 2008 GAO study. President Obama referred to Ugland House yesterday. “On the campaign, I used to talk about the outrage of a building in the Cayman Islands that had over 12,000 businesses claim this building as their headquarters,” Obama said. “And I’ve said before, either this is the largest building in the world or the largest tax scam. And I think the American people know which it is: The kind of tax scam that we need to end.” Maples and Calder, the law firm that occupies all of Ugland House in Grand Cayman, said Obama is mistaken. No Financial Misconduct “I’m sorry to disappoint anyone, but our office is neither the largest building in the world nor a center of financial misconduct,” said Charles Jennings, joint managing partner of Maples and Calder. “Having a registered office address in the Cayman Islands is driven by commercial considerations, not by tax avoidance,” Jennings said. “It allows companies to raise capital and conduct global business.” The firm, which provides services for the corporations that use its address, has incorporated more than 6,000 new companies over the past five years. Back in 2004, the building served as home to 12,748 companies using the same address in the Caymans, a British crown colony 150 miles south of Cuba. Del Monte Fresh Produce Inc., whose corporate headquarters is in Coral Gables, Florida, lists another address – Walker House on Mary Street in George Town, Grand Cayman – in its SEC filings. That’s around the corner from Ugland House. Del Monte’s effective tax rate for 2008 was 3 percent, up from 1 percent the year before. Del Monte spokeswoman Vidya Samsundar had no immediate comment on why the company is incorporated in the Caymans. Editor: Jonathan Neumann, Laura Colby To contact the reporter on this story: David Evans in Los Angeles at davidevans@bloomberg.net Last Updated: May 5, 2009 00:01 EDT

I love how when you go to a nice pier in Miami/Ft. Lauderdale/Naples all the Yachts fly under Nassau or the Cayman Island flags.

Instead of calling this a “tax scam”, Obama should focus on how to win those companies back! The United States has one of the highest corporate tax rates in the Western world. When companies pay higher taxes, they create less jobs. It’s a simple matter of cash flow. My question to the Democrats again and again is this: what is your fundamental problem with corporations creating jobs? If your problem is legal tax avoidance, then why not reform the tax laws to BENEFIT the companies that are job-creating super engines?

HELLO: Little people have professions too! Just because they are smaller doesn’t mean they HAVE to take up as much office space as their larger full-sized human counterparts. It’s not a tax scam, it’s discrimination against Little people! personally I think 18’857 Little people CAN fit into a 5-story building. And if that doesn’t burst your bubble, then how about we count how many stories are UNDERGROUND? Ever seen the movie “Resident Evil”? Huh? If the Umbrella corporation can build all that stuff underground, I think Little people can too. They must be good at digging!

+1 black_ops! kkent: I don’t think the Democrats have a fundamental problem with corporations creating jobs, I think the problem is corporations hiding taxes overseas and paying less than average Americans do. And I don’t think most of these companies can be classified as job-creating super engines, even if they did have a lower tax rate. The trend is to outsource jobs overseas for as cheap as possible, and they don’t give a flying f#@k about putting average Americans to work.

nuppal Wrote: ------------------------------------------------------- > I love how when you go to a nice pier in Miami/Ft. > Lauderdale/Naples all the Yachts fly under Nassau > or the Cayman Island flags. Is that to avoid luxury taxes? If so, then that’s awsome–no luxury tax plus you can deduct expenses associated with ‘running’ the boat. Man, being a CPA is so much easier than investing…

A global game of chicken. Most, if not all G20 nations, would have to follow Obama, otherwise, yes, some corporations might be lost overseas and perhaps some jobs. Still, asking companies that generate their profits in the US, to pay US taxes to defray the cost of providing them with the infrastructure, market and other resources is not an evil socialist scheme, just being fair. Anyone here heard of the Laffer curve, this might put the conversation in the proper context.

Likewise, many companies in the States have holding companies in Delaware to avoid state income taxes. And yes, on the subject of the Laffer Curve, if the US cut the corporate tax rate, we would likely increase revenues, because there would be less incentive to set up an office in the Cayman Islands. Unfortunately, not many in Washington see it that way.

“if the US cut the corporate tax rate, we would likely increase revenues, because there would be less incentive to set up an office in the Cayman Islands.” How do you know that we’re at that point? Maybe we’re at the optimal tax rate from a revenue perspective. Maybe the optimal rate is a few points higher. Who knows?

Hello Mister Walrus Wrote: ------------------------------------------------------- > “if the US cut the corporate tax rate, we would > likely increase revenues, because there would be > less incentive to set up an office in the Cayman > Islands.” > > How do you know that we’re at that point? Maybe > we’re at the optimal tax rate from a revenue > perspective. Maybe the optimal rate is a few > points higher. Who knows? Actually that was my intention in bringing up the topic. I think some say that you don’t hit the max until you are in the 30s, in some countries the max is in the 70s. But if the current effective rate they are paying is below 10%, then there is more to gain by raising taxes, than by lowering them.

Hello Mister Walrus Wrote: ------------------------------------------------------- > > How do you know that we’re at that point? Maybe > we’re at the optimal tax rate from a revenue > perspective. Maybe the optimal rate is a few > points higher. Who knows? You’re right, I don’t know, and there’s absolutely no way to know when we’re at the optimal level. However, I do know that the US has some of the highest tax rates in the world, and that with GWB’s tax cuts, tax revenue increased…which, to me, indicates that we are still on the right side of the curve.

steph96: Most companies that skip out on taxes now, would still find ways to skip out on taxes if you lower their rate…unless you lower it to 5%, but that’s unrealistic and unfair. More on the job creation side, I don’t know of any companies that would go on a hiring spree just because their tax rate was lowered. If they’re operating efficiently with the current level of headcount, they’re not necessarily going to increase their headcount just because they have more cash. They’re going to continue to try to operate as lean as possible. If they make their profits in the US, they shouldn’t be able to hide $ overseas. I agree with ceo1975.

chrisclwtr Wrote: ------------------------------------------------------- > +1 black_ops! > > kkent: I don’t think the Democrats have a > fundamental problem with corporations creating > jobs, I think the problem is corporations hiding > taxes overseas and paying less than average > Americans do. And I don’t think most of these > companies can be classified as job-creating super > engines, even if they did have a lower tax rate. > The trend is to outsource jobs overseas for as > cheap as possible, and they don’t give a flying > f#@k about putting average Americans to work. Newsflash: corporations don’t care about putting ANYONE to work, foreign or domestic. They care about the bottom line. If the tax code were more favorable to domestic U.S. corporations (no just income taxes, but employment taxes, sales taxes and property taxes as well), then it increases the bottom line of after-tax cash flows. This after-tax cash flow, or free cash flow, or whatever name you want to give it, is money used for business expansion and growth. Business growth means more jobs. It’s a fairly fundamental concept that, once again, the Democrats don’t seem to appreciate. Once again, you have a liberal here attempting to make a moral argument out of the tax code when, in fact, a rational argument should be made. “Moral” solutions to rational problems often end up with results such as generational addiction to welfare and a maintenance of generational poverty, slums in the inner city housing projects, illegal immigrants dying in deserts and being raped by “coyotes”, and, in this case, active avoidance of the highest corporate tax rate in the Western world, thereby creating less revenue for the federal government. Both the Right and the Left want the same thing–job growth in the United States, but for some reason, the Left is convinced that corporations are fundamentally “evil” and unfair, when their SOLE goal is to make money to put food on the table of shareholders, executives and employees.

kkent Wrote: ------------------------------------------------------- > job-creating super engines? I’ve never heard of these. Are they more powerful than normal job-creating engines? If so, by how much? Lets take a utilitarian tack. Why not close the “tax scam” or whatever you want to call it and lower the corporate tax rate. If overseas tax avoidance (be it through the Caymans or the Swiss) is having enough of an effect on tax revenues for us to decrease the corporate tax rate while still remaining at the same level of tax revenues then great. If it has a negligible impact then what are we worried about? Full disclosure: I actually talked to a potential client from the Caymans yesterday. It is definitely a scam, by which I mean just another case of people making money by exploiting some regulatory loop hole. Actually, by allowing this loop hole I view it as transferring jobs from producting pursuits (like designing data storage, if you’re Seagate) to unproductive ones (like being a lawyer in the Caymans that exploits loopholes). At the very least, if we close the loop hole they would be more likely to use a US lawyer.

I’m not sure people on this board know how to read. I don’t care one way or the other if the loophole is closed. Fine, close it and lower the corporate income tax rate–I’m fairly certain that’s what I said in the first place. By the way, it’s not a “scam.” Legal tax avoidance is no more a scam than itemized deductions on an individual income tax statement. It boggles the mind that people on a finance board can’t differentiate between tax evasion and tax avoidance. Legal loopholes are the natural result of gov’t regulation and legislation that will never be stopped unless the gov’t recognizes that it fails at most things it touches.

It’s not a “scam” - they are doing it legally. And yes, I am in favoring of closing the loophole

kkent Wrote: ------------------------------------------------------- > chrisclwtr Wrote: > -------------------------------------------------- > ----- > > +1 black_ops! > > > > kkent: I don’t think the Democrats have a > > fundamental problem with corporations creating > > jobs, I think the problem is corporations > hiding > > taxes overseas and paying less than average > > Americans do. And I don’t think most of these > > companies can be classified as job-creating > super > > engines, even if they did have a lower tax rate. > > > The trend is to outsource jobs overseas for as > > cheap as possible, and they don’t give a flying > > f#@k about putting average Americans to work. > > Newsflash: corporations don’t care about putting > ANYONE to work, foreign or domestic. They care > about the bottom line. If the tax code were more > favorable to domestic U.S. corporations (no just > income taxes, but employment taxes, sales taxes > and property taxes as well), then it increases the > bottom line of after-tax cash flows. This > after-tax cash flow, or free cash flow, or > whatever name you want to give it, is money used > for business expansion and growth. Business growth > means more jobs. It’s a fairly fundamental concept > that, once again, the Democrats don’t seem to > appreciate. > > Once again, you have a liberal here attempting to > make a moral argument out of the tax code when, in > fact, a rational argument should be made. “Moral” > solutions to rational problems often end up with > results such as generational addiction to welfare > and a maintenance of generational poverty, slums > in the inner city housing projects, illegal > immigrants dying in deserts and being raped by > “coyotes”, and, in this case, active avoidance of > the highest corporate tax rate in the Western > world, thereby creating less revenue for the > federal government. Both the Right and the Left > want the same thing–job growth in the United > States, but for some reason, the Left is convinced > that corporations are fundamentally “evil” and > unfair, when their SOLE goal is to make money to > put food on the table of shareholders, executives > and employees. I’m not trying to make a moral argument, I’m making a legal argument. The legal loopholes need to be closed and the tax rate should be the tax rate. If you lower it, fine, but you shouldn’t be able to hide money offshore. I didn’t say corporations are evil (I happen to work for one), but I’m not as in love with them as you are.

kkent Wrote: ------------------------------------------------------- > I’m not sure people on this board know how to > read. I don’t care one way or the other if the > loophole is closed. Fine, close it and lower the > corporate income tax rate–I’m fairly certain > that’s what I said in the first place. > > By the way, it’s not a “scam.” Legal tax avoidance > is no more a scam than itemized deductions on an > individual income tax statement. It boggles the > mind that people on a finance board can’t > differentiate between tax evasion and tax > avoidance. Legal loopholes are the natural result > of gov’t regulation and legislation that will > never be stopped unless the gov’t recognizes that > it fails at most things it touches. Surely, if you can read and write 99.99% on this board can do it better, you have been a benchmark of sorts in the past. I am not sure whether you have an idea what you are talking about(I can bet my CPA qualification that you lack the capacity to understand the difference between tax avoidance and evasion - even accountants and lawyers do not, in most cases the decision is upto the courts as the line is very thin.) These arrangements, while legal - serve the purpose of tax evasion and should be closed.

JOE2010 Wrote: ------------------------------------------------------- > kkent Wrote: > -------------------------------------------------- > ----- > > I’m not sure people on this board know how to > > read. I don’t care one way or the other if the > > loophole is closed. Fine, close it and lower > the > > corporate income tax rate–I’m fairly certain > > that’s what I said in the first place. > > > > By the way, it’s not a “scam.” Legal tax > avoidance > > is no more a scam than itemized deductions on > an > > individual income tax statement. It boggles the > > mind that people on a finance board can’t > > differentiate between tax evasion and tax > > avoidance. Legal loopholes are the natural > result > > of gov’t regulation and legislation that will > > never be stopped unless the gov’t recognizes > that > > it fails at most things it touches. > > > Surely, if you can read and write 99.99% on this > board can do it better, you have been a benchmark > of sorts in the past. > > I am not sure whether you have an idea what you > are talking about(I can bet my CPA qualification > that you lack the capacity to understand the > difference between tax avoidance and evasion - > even accountants and lawyers do not, in most cases > the decision is upto the courts as the line is > very thin.) > > These arrangements, while legal - serve the > purpose of tax evasion and should be closed. Once again, JOE2010 personally attacks me without offering any kind of factually based response. Surprise surprise. I guess your CPA qualification didn’t help you understand that if it’s legal, it’s…umm, legal, and therefore not tax evasion.

chrisclwtr Wrote: ------------------------------------------------------- > kkent Wrote: > -------------------------------------------------- > ----- > > chrisclwtr Wrote: > > > -------------------------------------------------- > > > ----- > > > +1 black_ops! > > > > > > kkent: I don’t think the Democrats have a > > > fundamental problem with corporations > creating > > > jobs, I think the problem is corporations > > hiding > > > taxes overseas and paying less than average > > > Americans do. And I don’t think most of > these > > > companies can be classified as job-creating > > super > > > engines, even if they did have a lower tax > rate. > > > > > The trend is to outsource jobs overseas for > as > > > cheap as possible, and they don’t give a > flying > > > f#@k about putting average Americans to work. > > > > Newsflash: corporations don’t care about > putting > > ANYONE to work, foreign or domestic. They care > > about the bottom line. If the tax code were > more > > favorable to domestic U.S. corporations (no > just > > income taxes, but employment taxes, sales taxes > > and property taxes as well), then it increases > the > > bottom line of after-tax cash flows. This > > after-tax cash flow, or free cash flow, or > > whatever name you want to give it, is money > used > > for business expansion and growth. Business > growth > > means more jobs. It’s a fairly fundamental > concept > > that, once again, the Democrats don’t seem to > > appreciate. > > > > Once again, you have a liberal here attempting > to > > make a moral argument out of the tax code when, > in > > fact, a rational argument should be made. > “Moral” > > solutions to rational problems often end up > with > > results such as generational addiction to > welfare > > and a maintenance of generational poverty, > slums > > in the inner city housing projects, illegal > > immigrants dying in deserts and being raped by > > “coyotes”, and, in this case, active avoidance > of > > the highest corporate tax rate in the Western > > world, thereby creating less revenue for the > > federal government. Both the Right and the Left > > want the same thing–job growth in the United > > States, but for some reason, the Left is > convinced > > that corporations are fundamentally “evil” and > > unfair, when their SOLE goal is to make money > to > > put food on the table of shareholders, > executives > > and employees. > > I’m not trying to make a moral argument, I’m > making a legal argument. The legal loopholes need > to be closed and the tax rate should be the tax > rate. If you lower it, fine, but you shouldn’t be > able to hide money offshore. I didn’t say > corporations are evil (I happen to work for one), > but I’m not as in love with them as you are. Right, so asserting that corporations don’t give an F about the average American worker is not a “moral” argument. Right.