The Hottest New Tax Haven

When offshore driller Transocean (NYSE: RIG  ) announced in October that it was pulling up stakes and moving to Switzerland, I didn't think too much of it. In addition to reincorporating the company, top executives were going to relocate from Houston to Geneva. Having gone to school in the former city, I couldn't blame them for seeking a change of scenery.

Exiting the Western Hemisphere made some amount of operational sense for a global service company like Transocean. After all, something like 85% of the world's population is on the other side of the globe. Halliburton (NYSE: HAL  ) pulled just such a move last year, when it sent off its CEO to set up shop in Dubai.

My perception of Transocean's move has changed as more and more companies have piled on to the Switzerland Express in recent weeks. The exodus includes everyone from fellow oil-service companies Weatherford (NYSE: WFT  ) and Noble (NYSE: NE  ) to infrastructure heavyweight Foster Wheeler (NYSE: FWLT  ) and everything-but-the-kitchen-sink conglomerate Tyco International (NYSE: TYC  ) . Something else is going on here.

These companies, not all of which are physically relocating their headquarters, are already incorporated in some of the most tax-lax locales on Earth, including Bermuda and the Cayman Islands. So it's not just a simple matter of dodging the new Democratic administration.

Instead, it's a complex matter of dodging the new Democratic administration. President-elect Obama co-sponsored a bill last year called the Stop Tax Haven Abuse Act, so we know where he stands. It appears that the companies perceive places like Bermuda -- which has no tax treaty with the U.S. -- to be politically vulnerable. Foster Wheeler explicitly cites "the risk of adverse tax law changes" in its SEC proxy filing.

Federal tax revenue is recoiling rapidly in today's environment, and I think the moves by these companies to reincorporate plays about as well as various companies' bouncing over to Bermuda did during the last recession. The public outcry back then was loud enough to persuade Stanley Works (NYSE: SWK  ) to withdraw its plan. It will be intriguing to monitor the backlash this time around.

Tyco International is an Inside Value selection. To find out what exactly the company does, and for other beaten-down stock ideas, take the service for a spin, free for 30 days.

Fool contributor Toby Shute has never been to the Caribbean or Switzerland, and he doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 11, 2009, at 3:17 PM, Sridhartoronto wrote:

    Sad to say but nothing will happen. There will be a group which will blame the government rather than these scumbags for moving. Will you stop buying at Walmart if they shift their headquarters to Switzerland? Think not.

  • Report this Comment On February 23, 2009, at 2:15 PM, pedorrero wrote:

    Corporations, like individuals, usually try to act in their self-interest. Greedy politicians, whether in a god-forsaken third world country (take your pick), or the old USA, look for anything to tax or even confiscate. Not all the wealth in the world is from drug dealing or terrorism. Big governments would love to be able to track all money movements, and to some extent they do. Sometimes there are interesting compromises: for example Switzerland, caving partly to EU pressure against tax evaders, started taxing EU citizens and sending the proceeds to the EU -- anonymously, without surrendering the famous bank secrecy.

  • Report this Comment On February 28, 2009, at 4:37 PM, Buzz144 wrote:

    Obamacrats and the Americans who elected these irresponsible socialists are going to get what they deserve. You are going to see a wholesale movement of business out of this country. It is already happening. Obama and his socialist party can do what they want, but in the end the more they rattle their swords, the faster businesses and people will head to the border.

    Obama has already made it clear that he does not care a fig if the economy recovers or not. He is a full-blown socialists and he is going to do what he must to take control of the economy and make people wards of the state.

    I just sold my stocks and am buying gold. Obama will make Jimmy Carter look like a piker. Hello Australia.

  • Report this Comment On March 31, 2009, at 8:44 PM, brwn8484 wrote:

    Ross Perot made the statement that we would hear "a giant sucking sound" as businesses rushed to leave this country. Our leaders (Ooops, should I say Bozos) have no clue about what they are doing to our country. We need to stand up stand up and send these brainless knuckleheads back where they came from!

    I am pretty sure that these energy companies are leaving because of the cap & trade disaster about to be shoved down our throats. One thing is for sure.... If the democrat leadership has there way, we will end up just like all the other third world state run disasters that cant support their own governments. Welcome to the new world order boys. It's just around the corner!

  • Report this Comment On October 18, 2009, at 5:10 PM, quatro wrote:

    America has become much too invasive in it's citizens private business. The new tax laws Obama is trying to push through look aggressive and ugly to the rest of the world. The businesses that are moving may be the ones who can think outside of the box and not be so red, white and blue but see what is actually happening in their country. It's scary. Hello Soviet Union/ USA.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 798365, ~/Articles/ArticleHandler.aspx, 11/23/2014 10:13:14 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement