Word: congress
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Dates: during 1990-1999
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...many--that have offshore affiliates in the islands. This isn't as demanding as it might sound. It's largely a matter of filing papers and mailing out invoices. After all, the companies she represents are just paper entities. But they have come to represent a drain, created by Congress and perfectly legal, of $1.7 billion annually on the U.S. Treasury...
...company sets up what is called a foreign sales corporation. Companies can form FSCs in 32 countries designated by Congress--among them Jamaica and Barbados--or in a U.S. possession like the Virgin Islands. The company then funnels its exports (or, more accurately, the paperwork for its exports) through its offshore FSC. Presto: no federal income taxes on a portion of those export profits...
Programs such as foreign sales corporations are a product of Congress's attempts to legislate economic behavior--attempts that generally fail, to the detriment of the Treasury. In 1971 legislators became alarmed at the growing trade deficit--imports that exceeded exports--and the threat to American jobs. So Congress came up with a program, the Domestic International Sales Corporation, that deferred corporate taxes on export income. The idea was to encourage companies to keep jobs here...
When other countries complained that the program was an export subsidy--which it was--in violation of international trade agreements, Congress ditched it and set up FSCs. Our trading partners were happy; our corporations were happier, because the lawmakers forgave all the deferred taxes corporations had run up under the old program--a figure that then amounted to $13 billion...
...companies, there's yet another advantage to an FSC. As mandated by Congress, directors or their agents must attend one meeting a year in the vicinity of their FSC--a perfect excuse for a vacation in the Caribbean. Indeed, an FSC brochure put out by the Virgin Islands government extols the deep-sea fishing, the snorkeling, the reefs, the beaches, the 80[degree] weather. Its cover reads: U.S. EXPORTERS: TAKE A TAX BREAK IN PARADISE. Catherine Sittig, the FSC manager, said that when she asked one executive why he had located his FSC in Bermuda, he replied, "Because I play...