Democratic Underground  

God Bless Bermuda
May 11, 2002
By Brian Balta

Ah patriotism. What a wonderful thing it is to be able to love one's country. Last fall, we saw it everywhere. SUV's riding along with American flags hanging from their antennas, people standing up on overpasses waving the American flag, and God Bless America being sung at sporting events everywhere. There are a lot of people who really do love this country. I am one of them. I love being able to sit here on my computer and type complaints about whatever comes to mind. I love being able to think freely. I love not having a secret police force following me around. I love the opportunities this country has provided me. I love this country. That's why I can never be a C.E.O.

Today, the Stanley Works Corporation (SWK) announced that its shareholders have approved a plan to move the company to Bermuda. The company is one of the leading manufacturing providers in this country for hardware and tools. The Company CEO John M. Trani described the move by saying "Our shareowners have strongly affirmed the benefits of re-incorporation: creating greater operational flexibility, enabling better management of international cash flows and helping us deal more effectively with our complex international tax structure. The global playing field has been leveled, and our company is now better able to compete." What a great business move. The company has found a way to rework its tax structure to be more competitive in the new global marketplace. Wonderful work guys! I'd never have thought of that one.

Wait, that seems like a short column. Maybe I should analyze the move a bit more.

Naturally, the first question I should ask is "what is the company gaining by moving to Bermuda?" Well, this is where the issue becomes a bit thornier. The move to Bermuda will save the company an estimated $30 million a year in tax payments, as now it won't have to pay U.S. corporate taxes on any of their overseas sales.

Stanley is not the first company to move to Bermuda. Insurance companies started leading the exodus to the island a few years ago. Now the island can proudly claim that it hosts Ingersoll-Rand, Foster Wheeler, and Cooper Industries, a trio of industrial companies; Nabors Industries, which is involved with servicing oil wells; Tyco International, who's stock has lately been battered due to accounting concerns; Accenture Ltd, the world's largest accounting company, and our good friends Global Crossing, Inc, among others.

Ingersoll-Rand has estimated that it will save them $40 million in tax payments this year. Tyco has estimated that it has saved over $400 million since it moved. This looks like a wonderful business decision. Good work guys!

Wait, wait, must stop urge to compliment... must keep looking...

Let's take a glance at what happens when a company moves to Bermuda. According to the New York Times, when Ingersoll-Rand moved to Bermuda, essentially all they had to do was pay $27,000 for a mailing address, and they could register as a Bermuda company. The company doesn't have to hold meetings there, nor do they have to own land. In fact, they don't even have to have a single employee there.

Wait, now this is starting to sound a bit underhanded, so let me look at it again. Ok, so these companies are declaring themselves to be Bermuda Companies. For Stanley, they basically declare that they are a subsidiary of a larger company in Bermuda and change a few mailing addresses. Then, almost as if they had waved a magic wand, they're a Bermuda company instead of an American company.

They keep the same stock symbol, they are still traded on the NYSE, they still can sell products in America, their offices still have all the benefits of security provided by the American law enforcement agencies, the American Court System, and the U.S. Military. Several of the companies still receive very lucrative U.S. Government contracts. They can still lobby congress, they can still do every single thing they could do before the move, but they just don't have to pay those oppressive U.S. taxes.

Now let me get this straight. We're fighting a war right now to protect our very way of life. Our budget is back in deficit again. The government is on the border of being forced to default on the national debt. In the midst of all this turmoil, the patriotic response of these companies is to buy a mailbox in Bermuda so that they don't have to pay their portion of these expenses. This is reprehensible. How in the world can these people live with themselves? Our nation is in crisis, and it's more important to them to keep profits high, no matter the means they have to undertake to do so.

I'm done complimenting them now, now I'm more disgusted.

This is why I could never be a CEO I'm too emotional. I would actually care too much about the fact that I'm screwing over the country I love to be able to take an underhanded action like these companies have.

Some might say that it is the fact that U.S. Taxes are so high that is the reason why we see these companies leaving, and that these examples should drive the country to lower taxes even further. I would challenge anyone who thinks that to think about whether these corporations would be happy if we had cut back on the U.S. military enough to keep their taxes low, bringing it to the point where it couldn't respond in Afghanistan. Or, would the companies rather pass on any U.S. government contracts that might come their way, just so that they can argue that their taxes should be lower.

I can't imagine that any of these Bermuda companies would be willing to give up the things that the U.S. Government does which work to their benefit. However, through their actions, they're simply deciding that they don't want to pay for those benefits. There is a word for taking advantage of services without paying for them; stealing. Thankfully, there have been a few legislators who have spoken up on this issue. The New York Times quoted Representative Charles B. Rangel of New York, A Democrat on the House Ways and Means Committee, as saying "Some companies flying the Stars and Stripes renounce America when it comes to paying their taxes. They choose profits over patriotism. So far, the Bush Treasury Department has shown no interest in stopping these corporate moves, or even drawing attention to them. Supporting America is more than about waving the flag and saluting - it's about sharing the sacrifice. That's true of soldiers, citizens, and it should be true of big companies, too."

Senator Charles E. Grassley of Iowa, a Republican on the Senate Finance Committee, also chimed in by saying "There is no business reason for doing this, other than to escape U.S. taxation. I believe the Finance Committee needs to investigate this activity." Unfortunately, the voices of these Congressmen seem to have fallen on the deaf ears of an administration too pro-business to pay attention to the things businesses are doing. There are no estimates as to how much money the creation these Bermuda companies has cost the American government thus far, and not surprisingly, there is no one in this administration even doing any research to try to create such an estimate. It's just another thing that we're letting slide, because business can do no wrong.

I find it hard to believe two things in this situation: first that the nation is actually allowing these relocations to happen, and second, that these people actually have the gall to run and hide from their country in this manner. Haven't we all heard from the Bush Administration that we'll need to make sacrifices to win this war? We'll need to tolerate a higher national debt, intrusions into our privacy, and constant threats of another attack. These companies, however, can't be bothered to worry about petty little things like the future of democracy. All that matters is profit. If they have to screw the country out of the money that they owe the nation, then as far as they're concerned, that's their right, because their stockholders are more important than the entire country. To top it all off, the government is allowing it to happen too.

Sources:
U.S. Companies File in Bermuda to Slash Tax Bills
The Stanley Works Shareowners Overwhelmingly Approve Change in Place of Incorporation to Bermuda

 
Brian Balta is a student at Indiana University, and is a columnist at www.hoosierreview.com, IU's newest news source.

Printer-friendly version
Tell a friend about this article Tell a friend about this article
Discuss this article
Democratic Underground Homepage