Thursday, Feb. 26

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Illinois bars state contracts to corporations using foreign tax havens

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[FEB. 26, 2004]  SPRINGFIELD -- State Comptroller Dan Hynes' bill cracking down on corporations that use offshore tax havens to avoid paying their fair share of state and federal taxes was passed 113-0 by the House Wednesday and sent to the Senate.

Hynes' plan, sponsored by Rep. Gary Hannig, D-Litchfield, and Rep. Jack Franks, D-Woodstock, will prohibit corporate "expatriates" from doing business with the state and will close a loophole in the Illinois tax code that allows corporations to shift profits to overseas tax havens to avoid paying taxes in Illinois.

"I am heartened that the Illinois House understands the urgency and importance of this bill," Hynes said. "There's something fundamentally wrong when a large corporation can earn millions in profits from its operations in this country, then turn around and pay no taxes on those profits because it's technically incorporated in some sun-drenched island that -- big surprise -- has no income tax.

"The bottom line is that every corporation should pay what it fairly owes in taxes, just as every individual taxpayer is expected to do. When a small number of corporations take advantage of the system, they are simply shifting a higher tax burden onto individuals, small businesses and the majority of corporations that don't abuse the law. Today's [Wednesday] vote indicates that the House agrees with me that corporate tax evaders should not be rewarded with state contracts."

"This measure simply and fairly levels the playing field for businesses that apply for state contracts," Hanning added. "As we try to maintain a budget that allows us to provide state services, we need to take steps to discourage corporations from avoiding their fair share of taxes."

 

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Hynes said five corporate expatriates have benefited from state business in recent years: Accenture, Foster Wheeler Ltd., Tyco International, Ingersoll Rand and APW Limited. Payments to these companies have totaled close to $2 million since fiscal 2000. In addition, the Illinois State Board of Investment has invested in at least three expatriate corporations: Ingersoll-Rand, Tyco International and Transocean.

Hynes noted that North Carolina, California and Montana have enacted measures similar to his plan and that Ohio, Massachusetts, Minnesota, Pennsylvania and Texas are considering similar measures.

State action is necessary, he said, because Congress has failed to act on proposed federal legislation making corporate expatriates ineligible for federal contracts. "The IRS estimates that corporate expatriates siphon off at least $70 billion each year from the U.S. Treasury. And to add insult to injury, some of these corporations are multimillion-dollar federal government contracts. That is why we in Illinois are taking steps to close down the tax loopholes that are allowing them to get away with not paying their fair share," he said.

[News release from the office of
Daniel Hynes, state comptroller]

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