PRIVATIZING PRIVATIZATION….I’ve always known that U.S. companies sometimes incorporate offshore in order to reduce their corporate tax liabilities, but here’s a new one: hiring employees through a shell company in the Cayman Islands so you don’t have to pay Social Security or unemployment taxes:
Kellogg Brown & Root, the nation’s top Iraq war contractor and until last year a subsidiary of Halliburton Corp., has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.
….Social Security and Medicare taxes amount to 15.3 percent of each employees’ salary, split evenly between the worker and the employer. While KBR’s use of the shell companies saves workers their half of the taxes, it deprives them of future retirement benefits.
In addition, the practice enables KBR to avoid paying unemployment taxes in Texas, where the company is registered, amounting to between $20 and $559 per American employee per year, depending on the company’s rate of turnover.
As a result, workers hired through the Cayman Island companies cannot receive unemployment assistance should they lose their jobs.
In interviews with more than a dozen KBR workers registered through the Cayman Islands companies, most said they did not realize that they had been employed by a foreign firm until they arrived in Iraq and were told by their foremen, or until they returned home and applied for unemployment benefits.
Sweet! Congressional Democrats may have defeated Republican plans to privatize Social Security, but it looks like KBR has figured out a way to do it in their own little corner of the world whether anyone likes it or not. That’s American ingenuity at work.