Congressional investigators on Thursday will report their findings about the use of the Cayman Islands as a tax haven by thousands of U.S. companies.
The Government Accountability Office, a congressional watchdog agency, investigated a five-story building in the Caymans that is listed as the business address for more than 12,000 U.S. companies.
The GAO undertook the probe at the request last year of Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa, the chairman and senior Republican of the Senate Finance Committee, respectively.
The committee will review the GAO's findings at a hearing Thursday slated to begin at 10:00 am EDT.
Michael Brostek, the GAO's director of tax issues, is expected to provide additional details about American companies that have addresses in the building, known as the Ugland House, and how many have set up subsidiaries in the Caymans, a British territory.
In a letter requesting the investigation, Baucus and Grassley said the Ugland House is home to an international law firm.
Last month, President Bush signed legislation that prevents defense contractors, such as KBR Inc. and Combat Support Associates, from avoiding Social Security and Medicare taxes by setting up subsidiaries in the Cayman Islands.
The bill, the Heroes Earnings Assistance and Relief Tax Act, which provides tax relief for military families, includes a provision that would treat foreign subsidiaries of U.S. government contractors as American employers.
That means the subsidiaries have to pay the taxes that finance Social Security and Medicare programs.
Similar arrangements have become widespread among American businesses. The Senate committee estimates that thousands of companies have registered in the Caymans to dodge taxes. The losers, the committee has said, are ordinary Americans who foot a larger share of the tax bill.
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