August 30,2004

GAO Report on Tax Haven Companies, Federal Contracting

M E M O R A N D U M

To: Reporters and Editors
Re: GAO report on tax haven companies, federal contracting
Da: Monday, Aug. 30, 2004

Sen. Chuck Grassley, chairman of the Committee on Finance, and Sen. Max Baucus, ranking member, made the following comments on a new report from the Government Accountability Office, “International Taxation: Tax Haven Companies Were More Likely to Have a Tax Cost Advantage in Federal Contracting.”

Here is Sen. Grassley’s comment:

“In October 2002, I introduced legislation with Senator Baucus to stop the award of federalcontracts to companies that move their headquarters to an offshore post office box to escape U.S.taxes. The Reclaiming Expatriated Contracts and Profits (RECAP) Act was co-sponsored by SenatorCollins and referred to the Governmental Affairs Committee. This GAO report confirms what wesuspected all along. Expatriated companies pay less taxes and might get more government contractsthan companies that stay on U.S. soil. That’s 100 percent unfair. The best solution is to stopcorporate expatriation altogether. Senator Baucus and I have received overwhelming Senate approvalof our bill to help stop corporate expatriations. Our Reversing the Expatriation of Profits Offshore(REPO) Act passed the Senate as part of the Jumpstart Our Business Strength (JOBS) Act in May.The JOBS Act awaits a House-Senate conference committee. I’ll do my best to make sure the finalbill helps to stop corporate expatriations.”

Here is Sen. Baucus’ comment:

“GAO’s report highlights the real issue with corporate expatriation and tax shelters: fairness.It’s just not right that hard working people all over this country pay their fair share of taxes everyyear while some corporations set up mailboxes overseas to get out of paying what they owe. TheSenate has passed tax shelter legislation that removes the tax incentives companies currently enjoywhen they move their headquarters overseas. As the GAO report suggests, the failure to get thislegislation signed into law is undermining the integrity of our tax system and our competitiveeconomy. The playing field needs to be level for all companies bidding for federal contracts.”