The story comes from AllGov.com.
Setting up foreign subsidiaries allows American defense contractors not only to utilize cheaper labor and more favorable regulations, but also avoid paying taxes that fund key government safety net programs. This conclusion was reached by the Government Accountability Office (GAO), which examined 29 defense contractors and their reliance on offshore companies for their work overseas from 2003 to 2008.
If I’m reading the article correctly, the practice has been illegal since certain tax loopholes were closed in 2008.
But legal or not, surely I’m not the only one bothered by this practice. These are defense contractors. Not only did they avoid hiring American workers, they found a clever way to avoid paying taxes that fund programs to help American citizens. And it was all legal. How much sense does this make?
More info from David Isenberg at the Huffington Post.
Considering the sheer amount of money that the Pentagon spends on contractors for support, approximately $396 billion on contracts for products and services in fiscal year 2008 according to the GAO, the money not spent on payroll taxes can amount to quite a lot.
H/T: Bruce Prescott
Setting up foreign subsidiaries allows American defense contractors not only to utilize cheaper labor and more favorable regulations, but also avoid paying taxes that fund key government safety net programs. This conclusion was reached by the Government Accountability Office (GAO), which examined 29 defense contractors and their reliance on offshore companies for their work overseas from 2003 to 2008.
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