Offshore Tax Havens Haunt Administration & Enron Execs Remain Free - Why..??
thedailyenron.com
Aug. 1, 2002
Why would the Bush administration gut a Clinton administration rule proposed to cut tax evasion by foreigners living aboard? That's exactly what a newly disclosed Treasury Department rule would do. But, why? There has to be a catch...and there is.
On the surface, the move appears to be a favor to Florida and Texas bankers who profit greatly from Latin American expatriates who use banks in those states to hide money from their home-county tax collectors. Last January, Florida Governor Jeb Bush vigorously lobbied the administration for the change.
But this rather parochial appearing sop to the Bush Brothers' home states has deeper - more Machiavellian - implications going to the very heart of the offshore tax haven debate currently underway.
Since coming to office, the Bush administration has joined ranks with House and Senate Republicans who oppose clamping down on offshore corporate tax havens. Key GOP leaders fought a rearguard action during the Clinton years against all attempts to close these offshore havens on the grounds that they offer "tax competition" to the US that would eventually force the US to lower corporate taxes. (Read: Rep. Dick Armey's letter to Treasury: freedom.gov
But, since Enron and all the revelations that followed, openly supporting corporate offshore tax havens has become politically unwise. Besides growing public anger over corporate pirates hauling their booty to safe havens offshore, federal budget deficits once again loom large.
The IRS estimates that the US Treasury loses at least $70 billion a year to offshore corporate tax havens - or twice the annual cost of the war on terrorism. Others put the cost much higher, at around $200 billion a year.
The Clinton administration supported international efforts to cooperate in closing these offshore havens by throwing its support behind a treaty proposed by the Organization for Economic Cooperation and Development (OECD). Conservative Republicans stymied those efforts during the Clinton years and hope to kill them entirely now, though they can no longer do so openly.
So, back to the administration's new ruling. The new rule would strictly narrow the reporting of funds held by foreign nationals in US banks. The position is certain to create a rift between the US and other OECD members.
In May, the Treasury Department released a preliminary report on the reincorporation of US companies in offshore tax havens, such as the Cayman Islands and Bermuda. Rather than criticize the companies, the report faulted the complexity of the US corporate tax
code.
And there you have it.
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Bush/Cheney Co.'s Used Offshore Shelters
President Bush got caught yesterday in another stunning example of what is becoming a string of contradictions between his own corporate behavior and his newfound angst over crime in the suites.
Bush confided to reporters early yesterday that he was "troubled" by the growing practice of US companies sneaking offshore to avoid taxes. "I think we ought to look at people who are trying to avoid US taxes as a problem," he said. "I think American companies ought to pay taxes here, and be good citizens."
At that very moment the New York Daily News was breaking the story that Bush's own Harken Energy Corp., a Texas oil company, had itself set up an offshore presence in 1989 to hide potential revenues from its new Bahrain drilling operations.
Later in the day, the White House confirmed that Harken Energy Corp., where Bush was a director from 1986 to 1993, set up a subsidiary in the Cayman Islands.
It was also reported that Vice President Dick Cheney's company, Halliburton, registered as many as 44 subsidiaries offshore while Cheney was chief executive from 1995 to 2000.
When asked later about his own company's move offshore, Bush was clearly unprepared, and stammered, "Ah, as far as the Harken issue, we'll try to answer all your questions on that."
Previous questions about Harken's business dealings have been deflected with suggestions that reporters can find the answers in Harken's own board meetings and SEC documents. But, the administration has refused repeated requests for them to call for Harken and the SEC to make those records available.
Senate Majority Leader Thomas A. Daschle (D-SD) condemned the reported Harken offshore arrangement. "If it is true, I think it gets harder and harder to take his position on corporate accountability seriously," he said.
White House communications director Dan Bartlett also had no answers and responded to reporter's questions by changing the subject to homeland security. "Senator Daschle's time would be better served by scheduling a vote on homeland security than wasting it on an irrelevant issue from 13 years ago," Bartlett said.
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Hey! Remember Enron?
In recent days we have seen executives of failed Adelphia Communications and WorldCom hauled off to jail. But, whatever happened to Enron? Adelphia and WorldCom were recent crimes. Enron is a golden oldie by comparison.
What's holding things up?
Embarrassment, maybe. Earlier this year, American Family Voices identified at least 50 people within the Bush administration with significant previous ties to Enron.
In addition, Ken Lay, Enron's former CEO, served as a senior advisor on the Bush transition team. He also played a key role on Vice President Dick Cheney's Energy Task Force - the documents of which remain under lock and key.
Could it be that there is less appetite at the Department of Justice for Enron indictments now that there are so many other - less politically sensitive - corporate scofflaws to arrest?
Or could it be those cards still lying face down in front of Ken Lay that keep the administration from raising the bet and calling the game?
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Quote of The Day
"I encourage you to act quickly to reverse the previous administration's misguided policy. Many low tax nations, facing a threat of financial protectionism as early as this July, are under tremendous pressure to comply with the OECD's (offshore tax haven closure) demands...It is my understanding that career personnel are urging you to support the Clinton administration viewpoint on the grounds that the OECD initiative is needed to reduce tax evasion. This is a red herring. A global network of tax police is the wrong approach."
-House Majority Leader, Dick Armey (R-TX)
Excerpt from a letter to Treasury Sec. Paul O'Neill, May 16, 2001
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