ObamaCare contract muddles Dem message on tax dodgers
The Obama administration is employing an ObamaCare contractor that was once based in the tax haven of Bermuda, even as it assails corporations for lacking the “economic patriotism” to pay taxes.
Accenture was awarded a contract in January that’s now grown to well over $100 million to make improvements to HealthCare.gov, the federal enrollment portal that has caused a slew of headaches for President Obama.
The company is currently incorporated in Ireland, where it moved in 2009. Before that, Accenture had set up shop in both Switzerland and Bermuda, a noted tax haven, and has been called a tax dodger by a variety of mostly Democratic lawmakers for more than a decade.
Accenture received the HealthCare.gov contract months before Obama and Democrats began targeting an increasing number of corporations that have sought to slash their tax bill by shifting their legal address abroad. This week, the fast food giant Burger King became the most prominent U.S. company to inch closer to moving abroad after agreeing to merge with the Canadian chain Tim Hortons.
Obama has called companies seeking a so-called inversion “corporate deserters” and says businesses that renounce their U.S. citizenship simply pass off their tax burden on others. Democrats have increasingly incorporated that rhetoric into a broader election-year message of economic fairness.
A White House spokeswoman said the administration played no role in individual companies’ plans, and follows all laws and regulations when awarding contracts.
On inversions specifically, the spokeswoman reiterated Obama believes Congress should act to limit the practice, and that the Treasury Department is looking at possible administrative actions.
“Let’s be very clear: The president believes that, as a general matter, it is not right that some large corporations are able to exploit a loophole in the tax code despite having the bulk of their operations based in the United States,” the spokeswoman said.
But Accenture and its contract illustrate that the global tax status of corporations can often be more complicated than Democrats have suggested and the difficulties Washington faces, as it debates how to deal with those offshore practices.
Accenture argues that it’s not an inverted company, because it was never organized in the U.S. In most recent inversions, a company has merged with a smaller foreign business, allowing them to reincorporate abroad.
The Government Accountability Office agreed with them in 2002, when the company was incorporated in Bermuda, even as it noted Accenture was one of only four companies among the top 100 corporate federal contractors to be in a tax haven.
“Accenture has never been a U.S.-based or U.S.-operated organization and has never operated under a U.S. parent corporation,” James McAvoy, a company spokesman, told The Hill in a statement. “Accenture is, and always has been, a global organization.”
Still, Accenture has significant ties to the U.S. and acknowledges that taxes played a role in its decision to first incorporate in Bermuda.
Bermuda has long been a prime destination for companies seeking to lower their tax bill, while Ireland, with its 12.5 percent corporate rate, has become an increasingly popular corporate destination in recent years.
Apple, for instance, has faced criticism for its operations in Ireland, while companies that have inverted in recent years have looked there as well.
Accenture was originally known as Andersen Consulting and is an offshoot of the Arthur Andersen accounting firm that was founded roughly a century ago in Chicago.
As Andersen Consulting, which launched in 1989, the company was based in Switzerland. Accenture, as it became known in 2001, then decided to become a corporation based in Bermuda before moving to Ireland as it and other companies faced criticism for being located in tax havens.
Both the company’s chief executive and chief operating officer are based in Europe, and the U.S. isn’t the country with the most Accenture employees, though some senior executives are located here.
Accenture made 47 percent of its $28.6 billion in revenue in North America in 2013, higher than its totals in Europe, the Middle East and Africa (39 percent) and in Asia (14 percent).
The company has been quick to fight back against critics who have chided the company for its offshore arrangements.
“Accenture pays, and has always paid, U.S. tax on income generated by U.S. operations,” McAvoy said. “When we do business in the U.S., we contract directly, invoice and report the income under those contracts in the U.S.”
Because it’s not classified as an inverted company, Accenture isn’t affected by the current ban on federal contracts for businesses that reincorporate abroad.
Accenture won the HealthCare.gov job through its U.S. subsidiary, which isn’t barred from the contract process. Former U.S. corporations that have inverted, like Tyco and Ingersoll-Rand, also still receive federal contracts.
Democrats like Rep. Rosa DeLauro (D-Conn.) and Senate Majority Whip Dick Durbin (D-Ill.) are seeking to strengthen the contract ban and to make it harder for U.S. companies to flee offshore.
Under their proposals, a U.S. company that merges with a smaller foreign competitor would generally be counted as American for tax purposes.
Those measures would update provisions put in place a decade ago, when lawmakers from both sides of the aisle sharply criticized Accenture and other companies based offshore as tax dodgers.
DeLauro sought, ultimately unsuccessfully, to stop Accenture from receiving a contract for the Homeland Security Department worth billions of dollars.
“The United States government should not be doing business with those who want all the benefits of citizenship without any of the responsibilities that come along with it,” DeLauro said in June 2004, in language strikingly similar to what Democrats have employed a decade later.
The legislative proposals have gained little traction among Republicans. But narrower proposals from DeLauro targeting contracts to companies in the Cayman Islands and Bermuda, Accenture’s former home, have proven more popular with the GOP.
Still, the political landscape is different than it was a decade ago.
Republicans suggest that the Obama administration’s economic patriotism message is hypocritical, because of the contracts given to companies like Accenture.
Top GOP lawmakers say the real villain is America’s bloated tax code, with its top corporate rate of 35 percent, and haven’t blamed companies for looking outside U.S. borders.
Democrats, who badly want to see improvements to the federal ObamaCare site, generally declined to comment on Accenture’s contract, but noted that the company had not fled the U.S. Like Republicans, the president has said the best way to deal with inversions is a broader revamp of the tax system, even as he pushes for more targeted solutions.
Frank Clemente of Americans for Tax Fairness, a liberal group that has been outspoken against inversions, said that he backed the Obama administration’s efforts to boost the healthcare website. But the use of Accenture, he added, showed the broader problems that the U.S. faces when it comes to dealing with corporations that set up offshore.
“We may not have a law now that applies to them, but we sure as hell should,” Clemente said.
