Contractors' offshore tax havens under more scrutiny
House Dems urge Treasury secretary to back legislation requiring overseas subsidiaries of U.S. contractors to be treated as American employers for the purpose of payroll taxes.
A group of House Democrats Thursday wrote to Treasury Secretary Henry Paulson asking him to investigate reports of federal contractors using offshore tax havens to avoid paying payroll taxes that fund Social Security, Medicare and unemployment insurance for their employees.
Signed by House Democratic Caucus Chairman Rahm Emanuel of Illinois, Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., and Reps. Rosa DeLauro, D-Conn., and Lloyd Doggett, D-Texas, the letter focuses on Kellogg Brown and Root and its reported practice of hiring workers through shell companies in the Cayman Islands.
"Federal contractors that use offshore companies to avoid paying payroll taxes decreases the overall amount of funding available to these Trust Funds, while increasing the burden on Americans who play by the rules and make their contributions as required by law," the letter states.
It also notes the abuse was not limited to KBR but other contractors like MPRI. The lawmakers called on Paulson to back legislation from Rep. Brad Ellsworth, D-Ind., that requires overseas subsidiaries of U.S. contractors to be treated as American employers for the purpose of payroll taxes. The measure passed the House as part of a broader tax bill April 15 but has stalled in the Senate.