The Bush administration blamed high, complex US corporate taxes for a wave of companies relocating headquarters offshore and urged Congress to fix the tax code without damaging the economy.
"I don't think anyone wants to wake up one morning to find every US company headquartered offshore because our tax code drove them away and no one did anything about it," Treasury Secretary Paul O'Neill said Friday in a written statement.
"This is about competitiveness and complications in the tax code that put US-based companies out of step with their foreign competitors,'' he said.
In a 31-page report issued late Friday, the Treasury Department identified many ways US companies can cut their taxes -- from both foreign and US operations -- by setting up a paper parent in Bermuda or another tax haven.
Lobbyists say the change only affects taxes on US firms' foreign income, but the Treasury report said an immediate issue for Congress is ensuring that taxes from US income aren't dodged.
Ingersoll-Rand Inc, Tyco International, Cooper Industries and The Stanley Works are among the high-profile firms that have nominally reincorporated in Bermuda or are in the process of doing so. Stanley, the toolmaker longed based on Connecticut, has estimated the move will save it US$30 million a year in taxes.
The Treasury's acting chief of tax policy, Pam Olson, said Congress must take care not to take actions that "undermine the fundamental strength of our economy."
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