“Sacrifice is For Suckers”
How Corporations Are Using Offshore

Tax Havens to Avoid Paying Taxes

by Charlie Cray and Lee Drutman

Dissident Voice

May 8, 2003





"I think we ought to look at people who are trying to avoid U.S. taxes as a problem. I think American companies ought to pay taxes here and be good citizens," President George W. Bush told reporters last July, when asked about companies that incorporate overseas to avoid taxes. (1)


But the President has yet to get behind any legislative or regulatory effort to close offshore tax haven loopholes.


Meanwhile, an increasing number of corporations are either moving their headquarters offshore or establishing subsidiaries in offshore tax havens such as Bermuda (2), at a time when the actual taxes they pay are approaching historical lows.


Most studies indicate that corporate taxes are at their lowest levels in decades. Although the statutory corporate income tax rate is up to 35%, according to Robert McIntyre of the Institute on Taxation and Economic Policy, the top 250 companies paid what amounts to only a 20.1 % rate in income taxes in 1998, down from 22.9% in 1996 and well below the 26.5 percent that a similar group paid in 1988 (3). McIntyre estimates that currently, big corporations pay only about 15% of their pretax U.S. profits in federal income taxes. (4)


Looked at from the perspective of who pays what portion of the nation's overall taxes, the decline in corporate taxation is even more stark. In a recent special investigation on corporate taxes, Business Week reported that in 1940, companies and individuals split the federal income tax bill equally. Corporations now pay only 13.7% of the federal income tax bill and individuals pay 86.3%. (5)


According to the Congressional Budget Office, corporate income taxes in 2002 contributed less than one-tenth of overall revenues (down from 15 % in the 1970s and 25% in the 1950s and 1960s) and represent approximately 1.5 percent of GDP, down from 4.1 percent in 1965. (6)


Over two dozen major U.S. corporations have reincorporated offshore, most in recent years. (7) Community, union and investor resistance to Connecticut toolmaker Stanley Works' well-publicized attempt to move offshore (the company announced it was dropping the proposal last August) may have slowed that trend. (8) But the message that these corporations and their accountants and consultants seem to be sending ordinary Americans is that "sacrifice is for suckers." Or as an Ernst & Young tax partner explained: "we are working through a lot of companies who feel that … just the improvement on earnings is powerful enough that maybe the patriotism issue needs to take a back seat." (9)


Although no one knows for sure how much offshore tax avoidance is costing the country, Senator Max Baucus (D-MT), ranking member of the Senate Finance Committee estimates that the cost of tax avoiding by both individuals and corporations through the use of offshore tax shelters to be $70 billion a year - roughly the same amount that President Bush requested to pay for the first 6 months of the war and occupation of Iraq. (10)


While U.S. companies say they are moving offshore in order to compete with foreign multinationals that do not have to pay a tax on income earned overseas, U.S. corporate taxes are actually much lower than those of other industrialized countries.


Two congressional experts familiar with the corporate tax debate suggest that "the U.S. tax system, with its combination of deferral and a foreign tax credit, is probably more generous in most circumstances than the "territorial systems" used by other countries." (11) The data bear this out:


* By 2000, U.S. federal and state corporate taxes had dropped to 2.5% of GDP from 4.1% in 1965, while corporate income taxes in other OECD countries had risen to 3.4% GDP. In 2002, U.S. corporate taxes plummeted to only 1.5% of GDP. (12)


* The New York Times reported in August, 2002 that the 100 largest U.S. publicly traded companies pay a significantly smaller share of their profits in taxes worldwide than the 100 largest companies based outside the United States. (13)


The multinational corporations that dominate the global economy are able to manipulate their corporate structures to straddle different geographic locations and shift their operations on paper in order to take advantage of tax havens and other national differences in taxation.


Although other countries have done a better job of maintaining their corporate income taxes, they're worried, too. On his publication's 30th anniversary, Tax Notes publisher Thomas F. Field wrote: "One obvious change in the international area is the near-universal reduction in corporate tax rates on a country-by-country basis and the ongoing competition between taxing jurisdictions to reduce their corporate rates further. … A few years ago, at the first World Tax Conference sponsored by the Canadian Tax Foundation, a corporate tax panelist asked for a show of hands from the audience of tax professionals. He asked, "How many of you think there will be a significant corporate income tax in industrialized countries 10 years from now?" Only a few hands went up. "How many of you think there won't"? Almost all hands were in the air. That response is not a scientific survey, but it shows which way the wind is blowing." (14)


Martin Sullivan, a tax economist, recently published an analysis in Tax Notes that concluded that over and above the drop in taxes levied by foreign governments on U.S. multinational corporations over the last two decades, "multinationals have lowered their foreign taxes even further by shifting income from the traditional sites of U.S. foreign investment to bona fide tax havens. … In part, this additional reduction is due to shifting real economic activity. But it appears that the lion's share of income shifting is tax-motivated." Sullivan calculated that the effective rate of tax on profits generated by foreign affiliates of U.S. multinationals was more than halved between 1983, when it stood at 49.6 percent, and 1999, when it had declined to 22.2 percent. (15)


The ability of multinationals to shift income among jurisdictions may allow them to pay even less in taxes than most corporations.




There are two basic ways that corporations exploit offshore tax havens. One is through corporate expatriation, where a company transfers its corporate headquarters in name only to an offshore tax haven, without moving its top management or physical operations. Also known as "corporate inversions," this move allows companies to significantly reduce their taxes at minimal expense (e.g. by merely registering the company and establishing its residence by renting a post office box). (16) The savings are made as corporations no longer have to pay taxes on their overseas operations. (17) Tyco, for example, which relocated to Bermuda in 1997, estimated that it saved $400 million in 2001 alone. (18)


The second, and more complicated way that corporations exploit offshore tax havens is through the use of offshore tax haven subsidiaries.


In Appendix 1, we list the 25 corporations of the Fortune 500 with the greatest number of offshore tax haven subsidiaries, as reported to shareholders. (19) Virtually all of the Fortune 500 corporations with the most offshore tax haven subsidiaries (see Appendix 1 for a list of companies) increased the number these offshore subsidiaries significantly in recent years. For example, the company with the most offshore tax haven subsidiaries -- El Paso - added 192 tax haven subsidiaries between 1999 and 2002.


There are a variety of ways that large U.S. multinationals can use offshore tax havens to avoid taxes, depending on the type and location of the business they are in, their investment strategy, tax strategy, etc. Here are descriptions of a few ways that corporations use offshore tax havens to avoid taxes:


1) Deferred tax payments. The U.S. nominally has a worldwide system of taxation under which a company's worldwide income is subject to U.S. tax. However, corporations are allowed dramatically reduce their taxes by being allowed to postpone tax payments on the profits from overseas operations by reinvesting that money in foreign operations. (This is in addition to reductions on the taxes they pay to the U.S. for taxes paid to other countries).


The practice is common in the energy sector, where many large companies have an unusual number of subsidiaries in "far-flung places with lots of sand and sunshine but precious little oil or gas." (20)


Anti-deferral rules do require that some portion of income be counted immediately. Nevertheless, oil and gas companies pay the lowest taxes of any major industrial sector. Between 1996 and 1998 the petroleum and pipeline industry had an effective tax rate of 12.3 % -- the lowest of all major U.S. economic sectors. (21) "Energy companies have more opportunity to do this [shelter their income elsewhere] because much of their income is abroad," a former Treasury Department international-tax expert told the Wall Street Journal. (22)


According to our analysis, the Fortune 500 companies with the most offshore tax havens is dominated by companies in the energy sector, including El Paso (#1), AES (#2), Aon (#5), Mirant (#7), Halliburton (#8), and Williams (#14).


2) Income Stripping. In this scheme, money is "lent" by the offshore subsidiary to the U.S. parent company or another U.S. subsidiary and paid back to the offshore company at higher rates of interest. That interest payment is then deducted from the U.S. company's federal taxes.


One example of this occurred at Tyco, which set up a Luxembourg-based subsidiary to finance most of the company's debt. The Luxembourg subsidiary made loans to Tyco units in the U.S. and elsewhere, which then deducted the interest payments from their taxable income. (23)


3) Parking Intellectual Property ("Intangibles") Offshore. A third way corporations reduce their taxes is by relocating intellectual property to offshore subsidiaries in order to shelter income from overseas sales. The subsidiary company then charges a licensing fee for the use of trademarks, patents, etc. Any such income that comes from overseas operations is not taxed in the U.S. The subsidiary can also charge the U.S. parent or other U.S. subsidiaries -- a variation of income stripping.


The practice of holding intellectual property offshore began in the early 1990s and is now so widespread that it has prompted an aggressive crackdown by the IRS on alleged abuses that one IRS consultant says could total tens of billions of dollars. (24) More than two dozen U.S. pharmaceutical and computer companies have set up subsidiaries in Bermuda in recent years.


4) Transfer pricing is another arrangement whereby companies with operations around the world arrange their transactions so that profits show up in jurisdictions with kinder, gentler tax collectors (since a large percentage of international transactions and trade takes place within centrally managed corporations either as sales between subsidiaries or as sales between parent and subsidiary, the prices are not set by arms-length market forces).


Senator Byron Dorgan (D-ND) released a study in 2002 that estimated that U.S. multinationals used phony pricing schemes to avoid over $53 billion in taxes in 2001. The companies use phony pricing schemes which under-price goods sold to offshore affiliates and over-price goods purchased by U.S. companies from their overseas affiliates. The sham transactions have the effect of moving U.S. profits - and tax liability - out of the U.S. where they are not subject to U.S. taxation. The problem has continued to grow in recent years. In 2001, the authors of the study estimated the schemes cost $53 billion, up from 35.7 billion in 1998. (25)




Enron, the poster child of corporate crime, fraud and abuse, was no less aggressive in seeking to avoid paying taxes than it was in manipulating markets and cooking the books. Enron paid no taxes in four of the five last years before it filed for bankruptcy. (26)


Robert Hermann, a former managing director at Enron and general tax counsel explained to the Washington Post how he "grew increasingly uneasy in recent years as more and more of the company's reported profits came from one-time tax transactions rather than business operations." (27)


One of the interesting things about Enron is that it did not move offshore. The company was incorporated in the U.S. (Oregon). It managed to avoid paying through a number of tax strategies, many involving the use of offshore subsidiaries. The company had an enormous number of subsidiaries in offshore tax havens (872 according to its 10-K report, which does not include many "special purpose entities" used to hide the company's debt).


The Enron example also points to the need to look beyond the issue of corporate expatriation -- also known as "corporate inversions" (28) to other ways that corporations use offshore tax havens to avoid paying taxes. As Business Week has noted, "concern about these so-called corporate inversions may be taking attention away from a larger, more subtle migration of corporate income and assets toward countries with lower rates." (29)


Enron's aggressive tax strategies, while extreme, were nonetheless indicative of how common it is for large corporations to use their resources to game the tax system. As Business Week explained, "Tyco and Enron may have been the masters, but it's not just corporate rogues that have taken tax games to new extremes. After all, Enron Corp. modeled its massive tax department on that of General Electric Co. and a host of other big companies." (30)


Lindy Paull, the Chief of Staff of the congressional Joint Committee on Taxation summed it up this way: "Viewed in their entirety, Enron's structured transactions not only pushed the concept of business purpose to the limit (and perhaps beyond) but also highlight several general issues about the nature of the tax system and a corporation's attitude towards it. Enron's behavior illustrates that a motivated corporation can manipulate highly technical provisions of the law to achieve significant unintended benefits." (31)




It is difficult to correlate the number of offshore tax haven subsidiaries a company has with how much it actually pays in taxes. In large part, this is due to a lack of transparency in how much corporations actually pay in taxes.


One of the key revelations of the Joint Committee on Taxations' investigation into Enron's financial and tax shenanigans was the wildly different tax information that Enron reported to its shareholders (via SEC reports) and to the IRS. (32) From 1996 to 1999, Enron paid no Federal income tax, reporting tax losses of three billion dollars to the IRS. At the same time, it reported over two billion dollars in profits to its shareholders.


If investors (including pensioners and small investors whose lifetime savings were lost) had been aware of the over $5 billion gap, they might have realized much earlier how unsound the company's core business was.


Tax experts also suggest that if investors had seen WorldCom's tax return the year before the telecom giant collapsed, it also would have been an indication of trouble. (33)


The gap between the corporate income reported to shareholders and the IRS has grown significantly, and likely reflects an increase in the use of offshore tax shelters. According to CFO Magazine, although there was no significant difference between pretax book income and taxable net income reported to the IRS in 1992, by 1996 a $92.5 billion gap had appeared. That gap grew to $159 billion in 1998. (34) Currently, Robert McIntyre estimates that only about 44% of the U.S. profits that big American corporations report to their shareholders are reported to the IRS. Although accounting treatment under the tax code is different from that under the generally accepted accounting principles used for financial reporting, recent studies using internal IRS data suggest that at least half of the gap cannot be explained by conventional book/tax differences and is "consistent with increased sheltering activity." (35)


By requiring publicly traded corporations to disclose selected tax return information (which they prepare for the IRS already, thus requiring little additional paperwork) investors could better determine if a corporations numbers are legitimate or cooked. This minimal improvement in transparency would help provide an early warning system for investors and analysts, and give the broader public a sense of whether or not a corporation is paying its fair share of taxes.




The obvious implication here is that Enron couldn't have done this by itself. As Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance committee put it, the Joint Committee on Taxation's Enron report "reads like a conspiracy novel, with some of the nation's finest banks, accounting firms, and attorneys working together to prop up the biggest corporate farce of this century." (36)


Enron sought out the advice of a coterie of accountants, banks, and lawyers, who were only too happy to sell them expert advice on how to trick Uncle Sam (i.e. the rest of us). Enron paid $40.2 million to Bankers Trust (now part of Deutsche Bank), $16.3 million to Deloitte & Touche, and $12.7 million to Chase Manhattan for tax-shelter schemes. Influential Washington law firm Akin, Gump, Strauss, Hauer & Feld got $1 million for providing a letter approving a tax shelter.


What happened at Enron is indicative of a larger trend - the mining of the tax code, which has become "ridiculously complex" (as Business Week describes it) by accountants, bankers and lobbyists familiar with the "annual welter of revisions from Congress and dogged work by an army of lobbyists. … [I]n the late 1990s, the hunt for tax breaks became a much bigger business. For one thing, a new class of professionals - Wall Street investment bankers - joined the legions of lawyers and accountants hawking tax-management services. "Squadrons of lawyers, accountants, and Wall Street structured-finance experts have made an art form of minimizing the U.S. multinational's effective tax rate within this maze of the U.S. tax code, tax treaties, and global tax systems," says Selva Ozelli, international tax editor for RIA, a New York provider of tax information and software." (37)


The benefits of this tax code expertise rarely trickle down to small businesses who can't afford to pay high-priced Wall Street consultants. As The late Senator Paul Wellstone explained on Nightline, "[I]n Minnesota, companies in Detroit Lakes or Red Wing or my town of North Field … don't have the lawyers and the tax accountants to let them do this kind of Enron scheme." (38)


As the New York Times recently explained, the decline in corporate taxes in recent years "was concentrated among the largest corporations. Corporate profits are officially taxed at 35 cents on the dollar, but the 10,000 largest companies actually pay only about 20 cents of tax on each dollar of profit. Most of the tax savings, academic studies and Senate Finance Committee reports show, come from tax shelters that range from the perfectly legal to frauds so complex that I.R.S. auditors cannot understand them." (39)


In addition to making some technical corrections to the corporate tax code, as recommended in the committee's report, the role of accountants in tax dodging suggests that the Securities and Exchange Commission needs to rethink Harvey Pitt's auditor independence rules, which failed to address the corporate tax dodge by allowing auditors to continue to provide tax consulting services.




One of the most outrageous tales of hypocrisy is the story of how many corporate tax dodgers continue to receive hundreds of millions worth of government contracts.


According to the General Accounting Office, for instance, four of the top 100 federal contractors that are publicly traded corporations - Accenture, Tyco, Foster Wheeler and McDermott International - are incorporated in a tax haven country. (40) The four accounted for about $2.7 billion of contracts in FY2001. Accenture, for instance, has over $1 billion in federal contracts ($278 million in 2001 alone, according to the GAO), including a five-year contract to revamp the IRS's own web site. Accenture paid just 7 percent of its profits in taxes worldwide from 1997 to 2000. (41)


A number of companies that have received large contracts for military support and the reconstruction of Iraq after the war are among those with the large number of offshore tax havens - including Halliburton (#8) and Fluor (#20).


Halliburton's close ties to Vice President Cheney, the company's former CEO has raised serious concerns about the granting of no-bid contracts to the company. (42)


Under Vice President Dick Cheney's tenure as CEO, the number of offshore tax havens at Halliburton grew from 9 to 44. During that same period, its taxes shrank from $302 million to a $85 million tax refund (1999).


Four companies that have non-weapons contracts with the Departments of Defense or Homeland Security have "relocated" offshore to avoid paying corporate income taxes. These include Cooper Industries ($55 million in savings per year), Global Crossing, Ingersoll-Rand ($40 million to $60 million) and Tyco International ($400 million). (43) Global Crossing's connections to the current administration include Richard Perle, who resigned as Chairman of the Defense Policy Board upon revelations that he was being paid by the company to lobby the Pentagon on their behalf. Perle is still a member of the Board.


Senator Mark Dayton introduced S. 134, the Wellstone Memorial Renegade Corporation Act in honor of the late Senator Paul Wellstone (D-MN), who was the first to try to close the loophole on giving government (homeland security) contracts to corporations that have moved offshore. Although the measure was unanimously endorsed during a Senate floor vote on the Homeland Security Act, it was later scuttled behind closed doors in a House-Senate conference committee. "It's the kind of hypocrisy that Paul Wellstone deplored, which is to say one thing and then do exactly the opposite," Dayton said. (44) (45)




1) CLOSE THE OFFSHORE REINCORPORATION LOOPHOLE. Companies that move their headquarters offshore in name only should be taxed as if they are still incorporated in the U.S.


2) INCREASE DISCLOSURE. The secrecy surrounding corporate tax-reduction strategies should be eliminated. Investors have a right to a clearer picture of the financial health of a company's core business, while all citizens have a right to understand how much corporations are paying in taxes.


3) STOP GIVING CONTRACTS TO TAX TRAITORS. Bar companies that have moved offshore from receiving taxpayer money in the form of government contracts.


4) ELIMINATE AUDITOR CONFLICTS. The loopholes in the Sarbanes-Oxley Accounting Reform Act and SEC regulations that continue to allow auditing firms to be paid to provide tax strategy consulting to their audit clients should be closed.


* Check out the twenty-five Fortune 500 Corporations With the Most Offshore Tax-Haven Subsidiaries


Lee Drutman is the Communications Director for Citizen Works, a Washington, DC-based nonprofit (www.citizenworks.org). He can be contacted at: ldrutman@citizenworks.org. Charlie Cray is a lifetime activist and writer. He is the Project Director of Citizen Works’ Campaign for Corporate Reform. This paper first appeared in the Citizen Works website.




1. Elisabeth Bumiller, "Bush Criticized by Lawmakers on Corporate Governance," New York Times, August 1, 2002. It's worth noting that Harken Energy Corporation established a subsidiary in the Cayman Islands while Bush was on the company's board of directors.


2. See Appendix 1 for a list of offshore tax havens. Bermuda's popularity as an offshore financial center has grown exponentially over the years. It now has approximately 12,000 foreign companies registered as exempted companies. E.G., at least 15 of the top 25 global insurers have a presence in Bermuda. See "Bermuda Popular as Offshore Center," Standard & Poor's, June 29, 2002


3. Robert S. McIntyre and T.D. Coo Nguyen, "Corporate Income Taxes in the 1990s," Institute on Taxation and Economic Policy, Washington DC. October 2000. Available at: http://www.ctj.org/itep/corp00pr.htm  


4. Email exchange with Robert McIntyre, April 15, 2003.


5. Nanette Byrnes and Louis Lavelle, "The Corporate Tax Game," Business Week, March 31, 2003.


6. For CBO figures see Congressional Budget Office, Budget and Economic Outlook 2004-2013, January 2003. See:


Figures cited are from page 5. The figures from the 1950s, 1960s and 1970s are estimates received from Robert McIntyre. Using IRS data, the New York Times reports that corporations paid 10.5 percent of all the taxes collected by the IRS in 2002, down from 16.4 percent in 1973. See David Cay Johnston, "Tax Inquiries Fall as Cheating Increases," New York Times, April 14, 2003.


7. For a list see http://www.citizenworks.org/corp/tax/taxdodgerslist.php  


8. "Tool Maker Backs Away From a Move to Avoid Taxes," New York Times, August 2, 2002.


9. David Cay Johnston, "U.S. Corporations are Using Bermuda to Slash Tax Bills," New York Times, February 18, 2002.


10. Senate Finance Committee Hearings, April 11, 2002. The figure, quoted by Senator Max Baucus (D-MT) is based on an estimate by IRS consultant Jack Blum. See http://finance.senate.gov/sitepages/hearing041102.htm  


11. John Buckley and Al Davis, "Extraterritorial Income/Corporate Inversion Debate: Will Myths Prevail?" Tax Notes, July 8, 2002.


12. "International Tax Comparisons," Citizens for Tax Justice, http://www.ctj.org/html/oecdtax.htm


13. David Cay Johnston, "Musical Chairs on Tax Havens: Now It's Ireland," New York Times, August 3, 2002. Johnston was reporting on a study by the Organization for International Investment.


14. Thomas F. Field, "Tax Policy - Then and Now," Tax Notes 30th Anniversary, 2002.


15. Martin Sullivan, "Data Show Big Shift in Income to Tax Havens," Tax Notes, Nov. 18, 2002, p. 880.


16. Corporate "inversions" are transactions in which the company sets up an offshore subsidiary and "inverts" the ownership, whereby the U.S. parent corporation becomes a subsidiary of the newly formed offshore corporation. The result of this reincorporation is that profits from overseas operations are no longer taxable by the U.S. government.


17. For more information about corporate inversions see our tax traitors web page. Also see John Buckley and Al Davis, "Extraterritorial Income/Corporate Inversion Debate: Will Myths Prevail?" Tax Notes, July 8, 2002.


18. Alex Berenson, "Ex-Tyco Chief, a Big Risk Taker, Now confronts the Legal System," New York Times, June 10, 2002.


19. See Appendix 1. The numbers are obtained from examining exhibit 21 lists filed by the companies in their annual 10-K reports with the Securities and Exchange Commission. Available online at www.sec.gov.  


20. Glenn R. Simpson and Alexei Barrionuevo, "Energy Groups Go Offshore to Reduce Their Tax Bills," Wall Street Journal, August 5, 2002.


21. Robert S. McIntyre and T.D. Coo Nguyen, "Corporate Income Taxes in the 1990s," Institute on Taxation and Economic Policy, Washington DC. October 2000. Available at: http://www.ctj.org/itep/corp00pr.htm


22. Glenn R. Simpson and Alexei Barrionuevo, "Energy Groups Go Offshore to Reduce Their Tax Bills," Wall Street Journal, August 5, 2002.


23. William Symonds, "The Most Aggressive CEO," Business Week, May 21, 2001.


24. Glenn R. Simpson, "A New Twist in Tax Avoidance: Firms Send Best Ideas Abroad," Wall Street Journal, June 24, 2002.


25. See http://dorgan.senate.gov/news/pressfull/record.cfm?id=187978. The study was conducted by Simon J. Pak, of Penn State University and John Zdanowicz, of Florida State University.


26. Bob McIntyre, "Less Than Zero: Enron's Income Tax Payments 1996-2000," Citizens for Tax Justice. http://www.ctj.org/html/enron.htm  


27. April Witt and Peter Behr, "Enron's Other Strategy: Taxes; Internal Papers Reveal How Complex Deals Boosted Profits by $1 Billion," Washington Post, May 22, 2002.


28. Corporate "inversions" are transactions in which the company sets up an offshore subsidiary and "inverts" the ownership, whereby the U.S. parent corporation becomes a subsidiary of the newly formed tax haven corporation. The result is that profits from overseas operations are no longer taxable by the U.S.


29. Nanette Byrnes and Louis Lavelle, "The Corporate Tax Game," Business Week, March 31, 2003.


30. Nanette Byrnes and Louis Lavelle, "The Corporate Tax Game," Business Week, March 31, 2003.


31. Lindy Paull, Chief of Staff of the Joint Committee on Taxation. Written testimony on the Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations, Senate Committee on Finance, February 13, 2003.


32. Joint Committee on Taxation, "Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations," February 2003.


33. Tim Reason, "Align the Books: The gap between the numbers reported to shareholders and to the taxman is growing. Critics contend it's time to explain why," CFO Magazine, November 1, 2002.


34. Tim Reason, "Align the Books: The gap between the numbers reported to shareholders and to the taxman is growing. Critics contend it's time to explain why," CFO Magazine, November 1, 2002.


35. Mihir A. Desai, "The Divergence Between Book and Tax Income," Tax Policy and the Economy, National Bureau of Economic Research, October 2002. http://www.nber.org/books/tpe17/desai11-20-02.pdf Desai estimates that the difference between tax and book income is approximately $154.4 billion in 1998, and suggests that more than half of that cannot be attributed to the usual differences in reporting to the IRS and SEC, such as the different accounting treatments for reporting on employee compensation (e.g. option exercises) and depreciation.


36. "Grassley Vows Continued Crackdown on Corporate Abuse," (press release), February 13, 2003.


37. Nanette Byrnes and Louis Lavelle, "The Corporate Tax Game," Business Week, March 31, 2003.


38. "Matter of Trust: Profits or Patriotism," Nightline (transcript), August 7, 2002.


39. David Cay Johnston, "Tax Inquiries Fall as Cheating Increases," New York Times, April 14, 2003.


40. GAO-03-194R Federal Contractors Incorporated Offshore: "Information on Federal Contractors That Are Incorporated Offshore," U.S. GAO report to Rep. Henry A. Waxman and Rep Jim Turner, October 1, 2002.


41. David Cay Johnston and Jonathan D. Glater, "Effort to Curb Tax Havens could Be Costly For Consultant," New York Times, August 6, 2002. As the Times reported, Accenture claims it was never an American company and therefore should not be lumped with others who moved offshore for tax purposes. The company was split off from Arthur Andersen in 2001.


42. Rep. Henry A. Waxman (D-CA), Ranking Minority Member, Committee on Government Reform and Rep. John D. Dingell, Ranking Minority Member, Committee on Energy and Commerce, letter to Hon. David M. Walker, Comptroller General of the U.S., April 8, 2003. Available at:


43. Letter to House Representative Henry Waxman from the US Army Corps of Engineers, April 8, 2003


44. See our list of corporate tax dodgers:



45. Tom Webb, "Offshore restrictions scuttled," Saint Paul Pioneer Press, February 20, 2003.



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