Another Iraq Contractor Avoiding Millions In Taxes Through Off-Shore Havens
Another Iraq Contractor Avoiding Millions In Taxes Through Off-Shore Havens
Last March, the Boston Globe reported that KBR — one of the top profiteers of the Iraq war — has avoided paying more than $500 million “in federal Medicare and Social Security taxes by hiring its workers through shell companies” based in the Cayman Islands.
Today, the Globe reports that another Pentagon contractor, Virginia-based MPRI, has also established offshore havens that have the appearance of avoiding payment of millions of dollars in Medicare and Social Security taxes and also evading scrutiny from the IRS:
In March 2005, one of the Pentagon’s most trusted contractors - Virginia-based MPRI, founded by retired senior military leaders - won a $400 million contract to train police in Iraq and other hotspots. Two months later, MPRI set up a company in Bermuda to which it subcontracted much of the work. […]
A year earlier, MPRI headed a joint venture that won a $1.6 billion contract to provide US peacekeeping forces in Kosovo and elsewhere. Three months later, MPRI set up a company in the Cayman Islands to do the work.
But tax lawyers say that MPRI appears to be avoiding the payment of roughly $4 million dollars a year in Social Security and Medicare taxes for the police-training contract alone and is sidestepping scrutiny by hiring workers through offshore entities based outside the jurisdiction of the Internal Revenue Service.
MPRI has hired “roughly” 400 employees through the Bermuda shell company, but the company also avoids taxes by hiring its workers as “independent contractors.” But experts, and even MPRI employees themselves, say their work would unlikely “pass the IRS test for self-employment.”
Georgetown professor Albert Lauber said […] that genuine independent contractors come into a job with their own equipment, require little training and oversight, and generally get the job done on their own schedule.
MPRI’s police trainers, who asked not to be identified, said they do not work that way. One former trainer working for MPRI in Iraq said that police trainers in Baghdad received letters at the end of 2005 saying that they might experience a brief disruption in their payments because “payroll was being moved to Bermuda to satisfy US tax code.”
The letters became a running joke among the trainers. “We said, ‘What do you mean, to avoid tax codes?‘” the former trainer recalled.
The Globe notes that as a result of MPRI’s practices, “workers cannot receive unemployment compensation when their jobs end and may be deprived of other protections under US law.”
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I assume the only the moderately to extremely retarded are surprised by this.
May 4th, 2008 at 12:22 pmYou know, I’ve had it. You wouldn’t even know there was an election going out there if it wasn’t for the plethora of McCain posts. And then when a Democrat wins a house seat in a solidly red district in Louisiana…crickets!
I’m out of here folks. I’ll look back occasionally to see if TP has changed it’s policies, but I’m not holding my breath. I will visit sites where they cover all sides of this election even if it means that their preferred candidate gets hammered. That’s fair and balanced, unlike TP trying to protect Hillary.
It’s been fun folks. See you around…
May 4th, 2008 at 12:24 pmThe “free market” isn’t free.
May 4th, 2008 at 12:26 pmWe hear you Bilbo.
May 4th, 2008 at 12:38 pm“payroll was being moved to Bermuda to satisfy US tax code.”
To elude US tax code. What a bunch of jolly tax thieves.
Yo ho! Set sail for Bermuda, mates! King Bush is almost gone, and we’ll no longer be able to keep to arrr privateerin’ ways!
May 4th, 2008 at 12:41 pmBye, Bilbo. See ya tomorrow.
May 4th, 2008 at 12:49 pmSuck the money out of the US Treasury and make sure that NONE of it goes back in as taxes.
How patriotic.
May 4th, 2008 at 1:05 pmWhat they should be doing is only giving out government contracts to US companies. There should be stipulations in all the contracts that they have to pay US taxes…. This is not that difficult of a stipulation and it only makes good sense. The fact that the government keeps allowing this to happen and not cracking down on the offenders is ridiculous. That would solve some of the budget problems..
May 4th, 2008 at 1:06 pmSo let me review…the US taxpayers are stuck with funding the contractors cost-plus crony capitalism in-group contracts. We are also stuck with interest costs due to the the debt that accrues from deficit spending, not to mention the follow-on effects in the rest of our economy. The US treasury loses Medicare/SSN revenue that would fund regular payments that go out to existing beneficiaries. And the individual employees of these firms are have their life-time earnings base reduced or pay the full individual+corporate amounts. The latter would be particularly important if they are seriously wounded in Iraq. I guess they would just wanna die.
Is this a perfect lesson of neo-con economics or what?
May 4th, 2008 at 1:37 pmBoy, there sure is going to be a fantastic kick-back for Dick Cheney.
_AIO_
May 4th, 2008 at 1:47 pmIf only slime were as desirable as oil — KBR is swimmin’ in it.
May 4th, 2008 at 2:06 pmIf the contract was won in a competitive bid process the company was required to respond to the number and types (experience and educational levels) of employees estimated for the contract. The total cost of the contract bid upon which the award was made included the cost of labor plus overhead (including employee benefits and taxes). If the company included in their proposal the fact that they would be hiring “independent” contractors from a foreign country instead of US citizens as employees the company is not at fault. The Government Contracting Officer should be in jail. If the company did not declare such arragements and accepted payment on the basis of the proposed labor rates for full time employees they are in breach of contract and subject to prosecution. The contract in question is in the public domain and a fully functional honest media (TP) should have already acquired all the necessary documentation and filed the appropriate complaints. However, these companies utilize the number one rule of bushco: Play ball with us or we will shove the bat up your ass.
The comments above are general in nature and may or may not apply to the contract in question so please don’t bother with the lecture. Just refer to the DFAR (Defense Federal Acquisition Regulations).
May 4th, 2008 at 2:07 pmThis is not rocket science. There is a simple test to determine whether a company has been evading tax. You look at a transaction and determine whether there is a legitimate business purpose for the transaction other than evading taxes. The concept of hiring US citizens to perform a contract from the US government through a foreign shell corporation has no other legitimate purpose other than evading taxes and other legitimate regulation of business activities.
There needs to be a serious crackdown on these practices. It will not happen under the Bush government which is a government by the corporations and for the corporations. We have seen the trend of using “independent” contractor status to avoid taxes, unemployment benefits and other regulations going on for a long time in the US. It goes along with redifining poorly paid, low level workers as supervisors to evade other labor regulations.
I have long seen the dual tactics of “free marketers” who believes that capitalism demands unfettered corporate activity without regulation and then espouse that business must be truly ammoral with no regard for the impact of their activities on their country, individuals or society. Corporate PR firms will advertise their “good corporate citizenship” but freely admit in any debate that their only goal is to profit. Indeed, they will note that it is their responsibility to their shareholders to stretch the law beyond its spirit to make a profit.
It is time to read Adam Smith, the father of capitalism, who noted that societal needs had to be advanced outside of the capital system.
May 4th, 2008 at 2:23 pmCrusty Old Bastard:
Gosh, I spent twenty five years litigating government contracts and I would not place the fault on the contracting officer. Please cite the FAR and DFAR provisions that you are relyng upon. The CO does not have a responsibility to enforce tsx law. I am also not sure where there is a requirement under FAR or DFARS that prohibits the use of non-US firms to supply personnel. There would most likely be a requirement for the contractor to provide US citizens or those with a certain US security clearance to perform certain types of tasks under the contract. The same would also be true of making a determination of whether the labor provided would constitute independent contractors. The problem here is that the employees hired were US citizens and would meet security and citizenship requirements under a contract. Please note that these were not competitive contracts. However, there should have been a requirement for submitting cost and pricing data under TINA to the CO. My guess (with some actual knowledge) is that the military was ordered to proceed with these as letter contracts due to the “exigencies” of the circumstances.
May 4th, 2008 at 2:52 pmDick Cheney did his job very well with helping Halliburton and MPRI get the US contracts without paying US taxes. Look for other companies to do the same thing. As Americans lose jobs and homes and even jailed for not paying taxes the friends of Cheney are laughing all the way to the off shore banks. Americans are more interested in Britney’s underwear and the hand out rebate check Bush is giving then looking at how our country is robbed by the current Administration. Cheney only took the job as VP to make sure the companies he represents got US tax dollars. You really don’t blame him as it was just that easy to do. Now Americans would rather impeach a President for having an affair then a President and VP from stealing taxpayers money and having soldiers killed for Iraq oil. At lease the US soldiers protecting the Iraq Oil fields and contractor get up to 3,000 dollars a month. While the Halliburton contracts work 6 hours a day 10,000 dollars a month without paying any US taxes. Look at who’s laughing now.
May 4th, 2008 at 3:05 pmNothing to see here folks, same old profit from war scam as ever. But, look, look, over there, Tom Cruise and Katie Holmes take their child Suri out into the sunlight!!!
May 4th, 2008 at 3:31 pmIf the workers and so-called executives of MPRI and KBR and others don’t want to play by the rules of the U.S., then they should be stripped of citizenship, all passports should be revoked, all accounts frozen, etc.
Screw the thieving bastards before they screw us.
May 4th, 2008 at 3:54 pmoh really? government contractors are being untrsutworthy? NOOOOOOOO!!? whats the world come to. I cant wait till Hillary’s COntractors start managaing our health care. I’m sure I’ll be dead in a week
american idolatry
May 4th, 2008 at 3:58 pmThese contracts need to be rewritten such that there needs to be x% US citizen/permanent resident employees and that despite where they are contracted the taxes are deducted up front, off the top, prior to any payments to the company. Furthermore, there must be severe penalties, backed by posting of performance bonds, requiring completion and US government acceptance within a specified time frame.
May 4th, 2008 at 4:21 pmwar profiteering is as old as war itself. Why any young man would want to don a uniform and take up arms only to be exploited is beyond comprehension.
May 4th, 2008 at 4:30 pmIf war is really necessary, there should be no profit in it. But this is a neocon war for profit…seems to be no other justification.
May 4th, 2008 at 4:33 pmQuoting Franklin Roosevelt ,during World War II,: “I don’t want to see a single war millionaire created in the United States as a result of this world disaster”?
I don’t think he pushed a tax cut either.
May 4th, 2008 at 4:41 pmDoc Rock says:
Please, let us at least get the basic facts right. These are Godamned US citizens being hired. The law does not give a shit with foreign contractors and what the hell they do. Show some god damned reading comprehension. The God damned US firm set up the god damned foreign shell company to hire god damned US citizens. No wonder why the Republicans win. You idiots can not even get the basic facts right.
May 4th, 2008 at 4:43 pmLong live the free market!
Free of the rule of law, government oversight, fiscal responsibility, and decency standards!!
If left alone, the markets will correct itself!
Free market forever! Yipee!!!
/sarc off
May 4th, 2008 at 5:17 pm
May 4th, 2008 at 5:22 pmI know this is out of context here, but it is a very serious issue! Rice lied about ‘The USA does not Torture’, while she was having secret meeting in the WH formulating the USA TORTURE PROGRAM. It is a crime under US law and it is a crime under International Law!!!! Please, tell everybody, don’t let this go away. Don’t be silence by a connivent MEDIA. It is a pathway to restore US’s credibility and to Heal your country which has been hurting since 9/11.
JMOHR, I love reading your posts.
There is no way that our government should be giving MILITARY contracts to companies outside the US. I know it has been done for decades but it’s so far beyond my comprehension that if the military is so damned important, why it’s given to people outside of our country. Especially things considered top secret (or whatever the correct phrase is).
That’s my biggest b!tch with the whole Airbus/EADS contract. There is no reason that this shouldn’t go to an American company. If the government is funding it with tax dollars all that money should be put back into America.
And any company which sets up a shell company to avoid taxes should immediately be put on a DO NOT USE list by the government. What industry does is one thing, what the country does with tax dollars is something completely different, IMHO.
May 4th, 2008 at 5:25 pmHow is this going to help pay for the bigger government under Bush and the Dept of Homeland Security?
May 4th, 2008 at 5:26 pmSo how do I, as an average American, get my paycheck directly deposited pre-tax to one of these “offshore accounts”?
Oh…it would be illegal for me to do that? Really….hmmm…isn’t that interesting…
May 4th, 2008 at 5:28 pmReally dumb question: If you pay an American company, that dollar bill gets respent in America and and single dollar has an impact more like 3 dollars. That money pays for more construction and housing.
If you pay an off-shore contractor, how much does that dollar stimulate the American economy.
May 4th, 2008 at 10:15 pmAnother dumb question: Does it make sense from a military and security standpoint, to outsource a large portion of our military to companies under foreign control ?
May 4th, 2008 at 10:16 pmJMOHR:
Interesting window on the govt contracts. However, as I remember it, these were all no-bid contracts. So I’m dubious that the contracting officers of the govt were given any substantial opportunities for oversight.
May 5th, 2008 at 4:10 pmThe biggest traitors always turn out to be the warmongers.
May 6th, 2008 at 1:13 am