Not that workers derived any benefit from this "special" arrangement; in fact, the use of off-shore tax havens by defense grifters had dire consequences when workers lost their jobs.
"In one state," GAO auditors revealed, "we reviewed documentation for about 140 former employees of several contractors who were denied unemployment benefits in 2009. State workforce officials indicated these benefits were denied because the employees worked for a foreign subsidiary and not an American employer."
Interestingly enough, many of the global hidey-holes used to shield corporate wealth from the IRS have long been identified by law enforcement investigators and political researchers as prime money-laundering venues for the international drugs trade.
This is hardly surprising. Considering the close proximity of U.S. covert operations, illicit arms- and drug trafficking, and general subversive activities carried out by the CIA and other members of the "Intelligence Community," what better way for defense firms to keep it "all in the family" so to speak, then to stash war-derived loot in discrete locations.
As researcher Alan Block described the metastatic growth of the tax-haven phenomenon in his groundbreaking work, Masters of Paradise: Organized Crime and the Internal Revenue Service in the Bahamas, "professional criminals were those who took it upon themselves to organize crime. Their true work was the process of organizing crime itself."
Block's description is all the more appropriate considering that it is the American militarist state that "took it upon themselves" to organize corporate looting on a planetary scale. After all, resource wars, military interventions or the standing-up of death squad states through CIA fomented coups, directly benefit imperialism's real, indeed only, constituents: U.S. multinational corporations.
Out of Sight, Out of Mind
A futile exercise perhaps, given that our corrupt representatives in Congress, "change" Democrats and troglodytic Republicans alike, will do nothing to close tax loop-holes big enough to sail an aircraft carrier through.
And why would they, since the largest contributors flooding congressional campaign coffers with cold, hard cash are the same firms that reap the benefits of corporate-friendly tax codes, as the Center for Responsive Politics points out.
Just for kicks, let's take a look at some of the worst malefactors, firms whose stated mission is to "protect" heimat citizens while inflating the bottom line through the creative use of foreign subsidiaries.
Aside from "taking advantage of foreign government markets for commercial work," the GAO reports, "a key benefit of using offshore subsidiaries cited by contractors and other experts we spoke with was the ability to reduce overall taxes."
Indeed, "one defense contractor's offshore subsidiary structure decreased its effective U.S. tax rate by approximately 1 percent equaling millions of dollars in tax savings," which of course did nothing to reduce America's swelling deficit or ameliorate crashing social services for millions of workers.
GAO "identified some defense contractors that used subsidiaries registered outside the place of contract performance to support DOD service contracts abroad. These offshore subsidiaries had no staff or business activity where registered."
I don't know about you, but I don't think Netherlands Antilles or the Cayman Islands have ever been major manufacturing hubs producing ballistic missiles, spy satellites, supercomputers or other assorted goodies for the National Security State!
Typically however, GAO discovered that for "one contract task order we reviewed, more than 80 percent of the contractor's staff were employed by its offshore subsidiary."
Tellingly, "while five of the six contractors in our case studies said that reducing FICA tax payments was the primary reason for using offshore subsidiaries," the auditors concluded that "this practice also allowed the contractors to reduce costs by avoiding state and federal unemployment insurance taxes for U.S. personnel working overseas."
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