Tax haven contractors — U.S. subsidiaries of corporate
parents located in tax haven countries — may have an
advantage when competing for federal contracts, the
Government Accountability Office has said.
It said those companies are able to shift income off shore
and have lower taxes on additional income from a contract,
thereby enabling it to offer a lower price relative to
non-haven domestic companies.
“One way for a contractor to gain a tax cost advantage is by
reducing its U.S. taxable income from other sources to less
than zero and by using its losses to offset some or all of
the additional income from a contract, resulting in less
tax on the contract income,” according to GAO-04-856.
It said in 2002 the federal government was involved in some
8.5 million contract actions and awards worth over $250
billion, and that some of the contracts were given to tax
haven contractors.
