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 |  Subject: Accenture Ltd to switch tax-haven locales  Wed May 27, 2009 4:11 am | |
| Accenture Ltd. is seeking to become the latest company to switch tax-haven locales.
On Tuesday, the consulting and outsourcing firm said its board of directors had unanimously approved switching the company's place of incorporation from Bermuda to Ireland.
The move comes amid a crackdown on tax havens by the Obama administration and congressional Democrats, who are targeting companies with substantial U.S. operations that are incorporated in tax havens like Bermuda to lower their overall tax burden.
"There are continued questions about companies incorporated in Bermuda," said Jim McAvoy, an Accenture spokesman. In its regulatory filing announcing the planned move, the company said it was motivated by legislative proposals that could increase the company's taxes, negative publicity about companies incorporated in Bermuda, and by other factors such as the growing importance of the company's European business.
In a trend that has gained momentum over the past six months, numerous U.S. companies are reincorporating from tax-friendly locations like Bermuda and the Cayman Islands to Switzerland and Ireland, in an effort to cope with what are expected to be significant changes in how the U.S. taxes multinational corporations.
As previously reported, Tyco International Ltd., Foster Wheeler Ltd., Weatherford International Ltd., Transocean Inc., Covidien Ltd., and Ingersoll-Rand Co. have all announced plans or finalized plans to make such moves over the past six months.
Many of these companies have said taxes were a reason behind the move but have also emphasized other strategic reasons for the changes.
Such moves could help companies preserve the tax benefits they had in Bermuda and the Cayman Islands, while using Switzerland or Ireland's tax treaties with the U.S. to protect them from possible adverse legislation, according to tax experts who have advised companies on the moves. Bermuda imposes no corporate income tax. Switzerland has a corporate income tax, but doesn't levy it on profits earned by subsidiaries overseas. Ireland also has a corporate income tax but doesn't impose it on various intracompany transactions, thus making the tax relatively easy to avoid, say tax professionals.
Over the years, various pieces of U.S. antitax-haven legislation specifically targeted countries that don't have tax treaties with the U.S., such as Bermuda. That could put companies incorporated in countries that do have tax treaties with the U.S. -- such as Ireland -- in a better position, according to tax experts who have consulted on such moves.
In 2001, Accenture reorganized from a partnership to a public company and incorporated in Bermuda. Mr. McAvoy said that Accenture was never incorporated in the U.S., has no corporate headquarters, and added: "Accenture has always paid its taxes in the countries where the income is generated." The switch to Ireland still must be approved by the company's shareholders; a vote is expected in the next three to four months.
Accenture -- the former consulting arm of defunct accounting firm Arthur Andersen -- paid taxes at an effective rate of 29.3% during 2008, securities filings show, down from the typical combined federal and state statutory rate of 39.5%. According to the company filing, 5.9% of this difference was due to lower taxes on its "non-U.S. operations." Accenture said its tax rate wasn't unusually low.
Accenture board members have debated changing the site of the company's incorporation for years, according to a person close to the situation. Directors "considered many different locations" besides Ireland, this person added. But the board didn't consider moving Accenture to the U.S. "What shareholder would ever vote to incorporate in a country that taxes your world-wide income?" the person asked.
Despite the move, the company said it had no plans for its executives to move to Ireland. The company's chief executive is based in Boston. Its chief operating office is based in Austin, Texas.
"None of our top executives are moving to Ireland, but that's totally irrelevant," said the company spokesman. "If it was a U.S. corporation, how many CEOs live in Delaware?"
Proposed legislation introduced in March could present a problem for companies shifting their place of incorporation from one tax friendly jurisdiction to another. Sen. Carl Levin of Michigan and Rep. Lloyd Doggett of Texas, both Democrats, submitted bills that both assume that companies controlled and managed in the U.S. -- regardless of their place of incorporation -- are subject to U.S. corporate-income tax.
Pres. Obama was a co-sponsor of a similar bill with Sen. Levin in 2006 and the Obama administration has already endorsed the proposed legislation.
http://online.wsj.com/article/SB124338175183056465.html |
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