U.S. Contractors and Tax Dodges

The despicable Associated Press, in one of its "IMPACT" stories (n surer guide to an AP story with an AGENDA), has suddenly discovered to relatively old tax dodge of inocrporating s compnay in the Cayman Islands to do business outside the U.S., even if it is primarily an "American" company hiring Americans.   This not only avoids U.S. taxes, but U.S. laws (such as labor and anti-discrimination laws).  Of course, the AP would probably never have done this story unless they could use the "hook" of a defense contractor operating in Kuwait to support U.S. troops as the "example" to point at with HORROR (horror I don't remember as to contractors in Kosovo, or elsewhere, during the Clinton Administration).  The story would be much more impressive if it were not part of the long standing AP agenda to attack U.S. defense contractors.

The Cayman islands have, of course, been a "tax haven" FOREVER.

This is yet another story with an agenda.  Don't hold your breath for the despicable Associated Press to do an "impact" story on the international activities and "tax havens" of billionaire George Soros.

Could Congress have, LONG AGO, required companies contracting with the U.S. government to comply with U.S. laws, or even inavalidate "shell" corporations without a legitimate business (as distinguished from legal) existence in the country in which they are supposedly located?  Of course.  In fact, there is no doubt taht Kosovo contractors, and contractors operating elsewhere in the world, take advantage of the same "tax haven".  IRAQ is NOT material to this story, but it IS material to the agenda of the despicable Associated Press. 

Okay, something should be done about this, whether we get out of Iraq or not.  But then I think something should be done about the AP too, if only to hold them in general and universal CONTEMPT.

My reply to an AOL comment may make this clearer:

"That this tax dodging tatic is legal is a disgrace. Why does the government allow it?"

Let me see if I can explain this, without the agenda filter of the AP.

U.S. laws are NOT "extraterritorial".  That means that we have no ability to regulate FOREIGN companies operating elsewhere, because that would violate the sovereignty of other countries (yse, I understand that leftist Democrats think that they can "regulate" the world, but fantasy worlds are not my department.  However, that does NOT mean that the U.S. has "no jurisdiction" (a typical AP LIE).  U.S. courts have jurisdiction over foreign companies doing business with the U.S. government.  Plus, we have jurisidiction over AMERICANS setting up the "shell" corporations, and the ability (CONGRESS has the ability) to disregard the "shell", with appropriate laws.   Plus of course, we can put requirements on contracts with the U.S. government (such as no "shell" corporatons).  Note how the Cayman Islands "tax haven" has been there a considerable time, without DEMOCRATS making much of an effort to change the "loopholes".

Notice, howeer, that this is TRICKY.   Interfering in foreign countries is a dangerous thing (as leftist Democrats recognize except when THEY are doing it).  Foreign corporations are the creatures of foreign countries.  You have to be CAREFUL in the laws you pass to address this problem, although it should be addresseed.

The reason that U.S. labor and anti-discrimination laws do not apply to foreign companies operating in foreign countries is NOT a matter of "jurisdiction".  It is a matter of U.S. regulations NOT having extraterritorial effect.  In other words, our "anti-discrimination" laws do NOT apply in MEXICO (or ANY foreign country).  If you do not even convey that concept, as the despicable AP does not, then you are hopeless (as the AP is).    There are MANY MEXICAN companies which are at least partial subsidiaries of U.S. companies, which operate in MEXICO.  U.S. laws do NOT apply to those companies, as a matter of SOVEREIGNTY.

The "evil" that the AP so incompetently addresses here is the SUBTERFUGE of what is really an American company setting up a "shell" in a "tax haven" like the Cayman Islands.  That IS an "evil", but the most dense person should realllize that it is TRICKY to devise laws which effectively "solve" this problem without infringing on the sovereignty of other countries. 

U.S. laws DO apply to U.S. companies, wherever they operate--at least as to their American citizen employees. U.S. minimum wage laws (as an example) would NOT ordinarily apply to KUWAIT employees hired in Kuwait. The trick is to prevent what are really U.S. companies from dodging the laws, while still respecting the legal sovereignty of other countries (and their right to allow corporations to be formed there).