Politics

KBR Dodges $500 Million In Social Security And Medicare Taxes In Cheney-Backed Scheme

kbriraqchart.jpg No private contractor has financially profited from the Iraq war more than Kellogg Brown & Root (KBR), which until last year was a subsidiary of Halliburton. The firm currently has more than 21,000 employees in Iraq, and between 2004 and 2006, received more than $16 billion in government contracts — far more than any other corporation.

Yet KBR hasn’t been passing on these enormous profits to American taxpayers or even its own employees, thanks to a plan that Vice President Cheney helped establish. Today, the Boston Globe reports that KBR has avoided paying more than $500 million “in federal Medicare and Social Security taxes by hiring workers through shell companies” based in the Cayman Islands. A look at the costs to KBR employees:

While KBR’s use of the shell companies saves workers their half of the taxes, it deprives them of future retirement benefits.

In addition, the practice enables KBR to avoid paying unemployment taxes in Texas, where the company is registered, amounting to between $20 and $559 per American employee per year, depending on the company’s rate of turnover.

As a result, workers hired through the Cayman Island companies cannot receive unemployment assistance should they lose their jobs.

KBR’s practices are extreme, even compared to its competitors. Other top Iraq war contractors — including Bechtel and Parsons — pay Social Security and Medicare taxes for their employees.

The Bush administration has aided this tax dodging. One of KBR’s shell companies is Overseas Administrative Services, which was set up two months after Cheney became Halliburtion’s CEO in 1995. Since at least 2004, the Pentagon has known about KBR’s practices, but chosen to ignore the issue.

Of course, KBR is more than happy to claim workers as its own in one instance: when seeking “legal immunity extended to employers working in Iraq.”

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