The nation’s top Iraq war contractor, and until last year, a Halliburton subsidiary, provides a shining example of how to avoid a fair share of its taxes and garner the benefits of political nepotism. Kellogg, Brown & Root (KBR) has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in the well-known tropical tax haven.
About half the 21,000 workers hired by KBR are American workers – workers who should fall under the requirement to pay into Medicare and Social Security along with the requisite contribution by the employer, KBR. The Defense Department has known since 2004 that KBR was avoiding taxes by declaring the American workers as employees of the shell companies. And the reason this is acceptable? The maneuvering offshore allowed the corporation to perform work more cheaply. The practice is unusual enough that only one other major contractor in Iraq does the same thing.
KBR is the largest contractor in Iraq with eight times the work of its nearest competitor. The corporation was the beneficiary of a no-bid, lopsided contract awarded in 2002 when the Bush, Chaney crowd decided to favor those with ties to Halliburton. KBR has an estimated $16 billion in contracts – a nice hefty bonus for being part of Chenay’s Halliburton circle. Although Congress has consistently attacked the practice used to avoid paying taxes, it has failed to act with any authority.
Senator John Kerry of Massachusetts, a Democrat on the Senate Finance Committee, recently has introduced legislation to close loopholes for companies registering overseas. Let’s hope it passes although I would almost bet that the legislation will not get far. Corporations seem to have a lot more pull in Congress than we average taxpayers do.
KBR not only avoids federal taxes but also avoids paying unemployment taxes in Texas, its location of registration. Since it doesn’t pay into the unemployment pool, it is not responsible for claims of unemployment compensation filed by workers who return to the United States after they complete their work in Iraq.
What a sweet deal, and many of the workers don’t even realize that they have been employed by a foreign company until they reach their destination in Iraq and are told by their foremen. And KBR’s competitors in Iraq have not gone to the same length to avoid paying their fair share of taxes. The likes of Bechtel, Parsons, Washington Group International, L-3 Communications, Perini, and Fluor – all corporations receiving contracts in Iraq – pay Social Security and Medicare taxes for their American Workers.
Over the past five years of the Iraqi occupation, KBR has avoided more than $500 million in tax liabilities. What an “in your face” assault on the average American taxpayer. While we struggle to pay ever-increasing tax burdens, the power of corporations in our “free-market” system once again proves that there is no free-market – that power is king and enough power buys a tax haven in a tropical paradise.