WASHINGTON (Reuters) - Congressional investigators will travel to the Cayman Islands next week to look into U.S. companies operating offshore as governments worldwide take a tougher stance on tax dodgers.
"Our hope in sending GAO investigators to the Caymans is to get some answers about ... what's really happening with U.S. companies going offshore," Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said in a statement.
The GAO, or Government Accountability Office, is the nonpartisan investigative arm of Congress.
A Cayman government statement said GAO officials would meet with Cayman officials for briefings to "address any misperceptions about the role of Cayman's financial services sector relative to U.S. business interests."
For many years, critics of the Cayman Islands and other tax havens have related tales of office buildings plastered with bronze plaques for phantom shell companies set up to hide the assets of corporations and the rich from tax authorities.
Baucus specifically said an office building called Ugland House in the capital of George Town "has been the source of much debate on the Senate floor over the past few years."
The five-story building on a palm tree-lined boulevard has reportedly been the official address of thousands of shell companies, including units of major U.S. corporations.
"Government understands that the GAO will also meet with Maples and Calder, the tenant of Ugland House," the Cayman statement said. Maples & Calder is an international law firm.
Kurt Tibbetts, leader of government business for the Cayman government, said in the statement: "While the U.S. political context to the U.S. Congress' apparent interest in the Cayman Islands is contentious ... The GAO visit is regarded as a unique opportunity to set the record straight."
Earlier this week, the U.S. Internal Revenue Service joined other nations in probing possible tax evasion by hundreds of rich individuals, including more than 100 Americans, with bank accounts in Liechtenstein, a tiny European principality.
Sen. Carl Levin said Tuesday that the Liechtenstein case marked a new chapter of international cooperation on combating tax evasion. The Michigan Democrat chairs the often tax-focused Senate Permanent Subcommittee on Investigations.
Rich Americans dodge more than $100 billion a year in taxes by hiding assets in the Cayman Islands and other offshore tax havens, Levin said at the Reuters Regulation Summit on Feb. 8.
Under legislation he is offering with Sen. Barack Obama, a Democratic presidential hopeful, Levin said it would become easier for federal authorities to pursue possible tax evaders.
A thriving business in tax avoidance has developed in recent years on Wall Street, with some purveyors even seeking U.S. patent protection for their off-the-shelf schemes.
Levin, Obama, and Norm Coleman, a Minnesota Republican, last year introduced a Senate bill to crack down on tax evasion strategies. It would ban patenting them and target 34 offshore tax havens, including the Caymans, Bermuda, and the Bahamas.
"High net worth individuals, particularly in Germany, who use offshore centers in order to get investments out of the reach of the domestic tax authority cannot be sure anymore that they will not be caught," said Dirk Nitzsche, senior lecturer in finance at London's Cass Business School. (Reporting by Kevin Drawbaugh, Editing by Toni Reinhold)
