WASHINGTON — Senators on a key tax panel demanded a crackdown on offshore tax havens in the wake of a new report that one building in the Cayman Islands is used as a business address for more than 18,000 companies.
Congressional scrutiny of the offshore tax vehicles used by companies, investment funds and wealthy individuals is increasing. A study by a separate Senate panel last week calculated that offshore abuses cost the U.S. government $100 billion a year in lost tax revenue.
“We’re going to find a way to make a huge dent in this problem,” said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee.
The Government Accountability Office, Congress’ investigative arm, said in a report released Thursday that the Ugland House, a five-story building in the Caymans, is used by 18,000 companies, 5 percent of which are U.S.-owned.
Another 40 percent to 50 percent have a U.S. billing address or other connection, the report said. More than 700 publicly traded U.S. companies are incorporated in the Caymans, according to the GAO.
Michael Brostek, director of tax issues for the GAO, said many of the entities are hedge funds or other investment vehicles. Some of the strategies used by large multinational companies, such as setting up subsidiaries in the Caymans, are legal, while others are not, he said.
Baucus said the Senate had previously looked into the Ugland House in 2004, when more than 12,000 companies used it as a business address.
“Remarkably, in the last four years, the Ugland House has found room for 6,000 new tenants, without even adding a new floor,” Baucus said.
Several senators criticized the Internal Revenue Service for not taking a tougher approach against offshore havens.
“I don’t think you’re taking this seriously,” said Sen. Kent Conrad, D-N.D.
Frank Ng, director of the IRS’s large and mid-sized businesses division, said the agency is stepping up its enforcement efforts and has dedicated 1,500 employees to international tax enforcement.
“We know this is a significant compliance problem for us,” he said, adding that offshore havens cost U.S. taxpayers billions of dollars. He would not make a more specific estimate.
