Please ensure Javascript is enabled for purposes of website accessibility

The Hottest New Tax Haven

By Toby Shute - Updated Apr 5, 2017 at 7:56PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Switzerland's tax regime is lovely this time of year.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Transocean Ltd. Stock Quote
Transocean Ltd.
$3.58 (2.44%) $0.09
Noble Corporation plc Stock Quote
Noble Corporation plc
Halliburton Company Stock Quote
Halliburton Company
$31.98 (3.34%) $1.03
Tyco International plc Stock Quote
Tyco International plc
Stanley Black & Decker, Inc. Stock Quote
Stanley Black & Decker, Inc.
$109.45 (-1.54%) $-1.71

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.