SpYiNg FoR DoLlAr$: MiLiTaRy CoNtRaCtOr$ aNd $eCuRiTy FiRm$ ReAp HuGe PrOfIt$

Tuesday, Feburary 16, 2010

by Tom Burghardt

As the Defense Budget Soars, Billions of Dollars are Channelled Offshore to Avoid Paying Taxes

The Obama administration is seeking to increase the obscenely bloated U.S. Defense Department budget to a whopping $708 billion for fiscal year 2011, 3.4% above 2010's record level, The Wall Street Journal reported.

While the overall budget deficit will balloon to a staggering $1.6 trillion in 2011, the result of massive tax cuts for the rich, declining revenues, a by-product of capitalism's economic meltdown, imperial adventures abroad and general corporate malfeasance (the old tax-dodge grift), the administration plans to cut $250 billion over three years from non-military "discretionary spending" on domestic social programs.

However, as the World Socialist Web Site points out: "President Barack Obama has done nothing to reverse decades of wage stagnation, mounting poverty, and attacks on the social welfare system. On the contrary, following George W. Bush, he has seized on the crisis to redistribute wealth to a tiny financial elite through the ongoing bailout of the finance industry."

It is no small irony that despite stark budget figures and an even bleaker future for the American working class, Washington Technology reported January 28 that the "29 largest publicly traded defense contractors increased their use of offshore subsidiaries by 26 percent from 2003 to 2008."

Citing reports by the Government Accountability Office (GAO), journalist Alice Lipowicz disclosed that the "subsidiaries helped the contractors reduce taxes, in part by avoiding Social Security and Medicare payroll taxes for U.S. workers hired at the foreign subsidiaries."

Considering that the Pentagon hands out some $396 billion annually to contractors, outsourcing everything from "in theatre" construction in places like Afghanistan and Iraq to pricey "intelligence analysts" at secret state agencies, cash not spent on payroll taxes by dodgy firms slices another hole into the already-shredded social safety net.

Amongst the largest firms cited in GAO's 2008 report, updated in January 2010, Oracle Corp., operates in 77 tax havens; Boeing Co., 38; Dell Inc., 29; BearingPoint Inc., 28; Computer Sciences Corp., 21; Fluor Corp., 34; General Dynamics, 5; Harris Corp., 13; Hewlett-Packard, 14; Honeywell International, 7; ITT Corp., 18; L-3 Communications, 15; Sprint Nextel, 7.

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??????___GUESS WHO'S NOT IN THE REPORT___??????===> SAIC International Locations

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Many of the firms are heavily-leveraged in the lucrative "homeland security" market and provide technology and "cleared" intelligence analysts, many of whom jumped ship from government service for richer, if more dubious employment, to a host of secret state agencies including the CIA, DIA, NSA as well as ultra-secretive outfits engaged in global satellite surveillance such as the National Reconnaissance Office (NRO) and the National Geospatial-Intelligence Agency (NGA).

===snipped===>An "Island Paradise" Where Profits Go to Hide

Despite fabulous riches showered on shareholders by taxpayers, the Military-Industrial-Security-Complex will not rest until every dime has been squeezed from the American people, swelling corporate abdomens well-past the bursting point.

In cinematic terms, think of America's ruling elite as a horde of sociopathic zombies gobbling everything in sight. Instead of screaming "Brains!" as in Sam Raimi's cult classic, The Evil Dead, corporate zombies cry "Cash! I Need Cash!" as they take down entire nations in one rapacious bite!

A new report published by the Government Accountability Office (GAO) in January found, "Many of the top 29 U.S. publicly traded defense contractors--those with $1 billion or more in DOD contracts in fiscal year 2008--have created offshore subsidiaries to facilitate global operations. Between fiscal years 2003 and 2008, they increased their use of these subsidiaries by 26 percent, maintaining at least 1,194 in 2008." DUHHHHHHHHHH

GAO auditors revealed that corporate subsidiaries in tax havens such as the Bahamas, Switzerland, the Cayman Islands, Bahrain, Netherlands Antilles, Jersey, Bermuda, the Channel Islands, Luxembourg, Macao, Lebanon, Liechtenstein and Cyprus "helped the 29 contractors reduce taxes, with about one-third decreasing their effective U.S. corporate tax rates in 2008 in part through the use of foreign affiliates, lower foreign tax rates, and indefinite reinvestment of foreign income outside of the United States."

A convenient shell game since the "indefinite reinvestment of foreign income" isn't taxable until its been repatriated to the United States. What do you think the chances are of thathappening any time soon?

As an added incentive that helped firms hit the old corporate "sweet spot," the congressional watchdogs found that "companies principally used offshore subsidiaries to hire U.S. workers providing services overseas on U.S. government contracts in order to avoid Social Security, Medicare--known as Federal Insurance Contributions Act (FICA)--and other payroll taxes. This practice allowed contractors to offer lower bids when competing for certain services and thereby reduce costs for DOD."

===snipped===>Out of Sight, Out of Mind

A futile exercise perhaps, given that our corrupt representatives in Congress, "change" Democrats and troglodytic Republicans alike, will do nothing to close tax loop-holes big enough to sail an aircraft carrier through.

And why would they, since the largest contributors flooding congressional campaign coffers with cold, hard cash are the same firms that reap the benefits of corporate-friendly tax codes, as the Center for Responsive Politics points out.

Just for kicks, let's take a look at some of the worst malefactors, firms whose stated mission is to "protect" heimat citizens while inflating the bottom line through the creative use of foreign subsidiaries.

Aside from "taking advantage of foreign government markets for commercial work," the GAO reports, "a key benefit of using offshore subsidiaries cited by contractors and other experts we spoke with was the ability to reduce overall taxes."

===snipped===>Flying the Friendly Skies ... With the CIA!

What do these studies tell us? It pays to have friends in high places! Let's take a peek at just two of the 29 firms profiled in GAO's 2010 report as well as their earlier 2008 investigation.

The Boeing Company (Boeing): Washington Technology listsBoeing as No. 2 on their Top 100 list of federal contractors with $10,838,231,984 in overall revenue.

Primary government contracts include projects for NASA, the Navy, Air Force, Army, Marine Corps, the Department of Homeland Security and the State Department. One subsidiary, and contract, which the giant firm isn't too keen on publicizing is Jeppesen International Trip Planning, the booking agent for CIA torture flights.

As Antifascist Calling previously reported, the firm is being sued by victims of the Bush administration's illegal practice of "rendering" (kidnapping) so-called "terrorists" into the hands of torture-friendly regimes or to CIA "black sites" in Europe and the Middle East.

===snipped===>Spying for Dollars [Let's not forget SAIC a.k.a. NSA West]

Computer Sciences Corporation (CSC): One of the largest defense contractors operating under the radar, CSC is No. 9 on Washington Technology's Top 100 list of prime federal contractors with some $3,435,767,906 in revenue.

The Falls Church, Virginia-based outfit's business includes consulting, systems integration and outsourcing, and their major customers include the Defense Department, NASA, Navy, Army, Air Force, Treasury Department, Health and Human Services, the Environmental Protection Agency, Transportation Department and Department of State.

In his essential book Spies for Hire, Shorrock has described CSC as "one of the NSA's most important contractors," managing "global information networks and produces and disseminates intelligence products, including specialized expertise in the area of imagery processing and archiving."

"After 9/11" Shorrock writes, "CSC formed a new business unit to go after homeland security and intelligence work," including contracts with the Defense Intelligence Agency.

Shorrock reveals that one of the "mission critical" consortiums that run DIA global operations "is managed by Computer Sciences Corporation (CSC). ... The CSC team includes CACI International and L-3 MPRI. This last company is one of the largest private armies in the world, and would have at its disposal hundreds of paramilitary officers who would fit in exceedingly well with the DIA's secret intelligence teams in the Middle East and North Africa."

According to the firm's web site, CSC's Intelligence Analysis and Operational Support division "applies advanced information technology, expert knowledge, best practices, and business process improvement in all phases of the intelligence cycle (planning and direction, collection, processing, analysis and production, and dissemination)."

"At the enterprise level," CSC informs us, "our prowess in systems integration, engineering, and consulting help create IT infrastructures and ways of doing business that put the right tools in the right hands at the right time, so that intelligence staffs and decision makers can get on with the business of protecting the country."

With no end in sight, the data-mining growth curve continues along its merry way, integrating and analyzing the electronic communications of Americans "captured" by CIA, DIA, FBI, NCTC and NSA data miners and their partners in the telecommunications industry.

Accordingly, CSC "develops and integrates automated tools for unique requirements of specialized intelligence analysts." Tools that enable secret state agencies to "Capture and mine information from multiple sources in multiple languages; Collaborate in real time with fellow analysts; Create models in which to store working data and test hypotheses; Discover insider threats by tracking network behavior; Automatically analyze and visualize complex data using intelligent software agents."

As with hundreds of other firms who trade top secret security clearances as if they were trading cards, CSC provides "experienced, cleared intelligence professionals who perform intelligence analysis, database construction and population, editorial support and quality assurance, production and collection management, analytic tradecraft training, on-the-ground acquisition of unique data sets, and foreign language support."

Conveniently, CSC has some 1,200 employees who they rent to the secret state at a premium price "who meet DCID 6/4 eligibility requirements and have access to Sensitive Compartmented Information (SCI) or Special Access Programs (SAPs)," i.e., Pentagon, CIA and NSA "black programs" only known by code words that escape congressional scrutiny, or indeed any democratic oversight.

===snipped===>"And Ye Shall Know The Truth and The Truth Will Set You Free"

WAKE UP AMERICA.....IT(s) OUR COUNTRY!!!

Love "Light" and Energy

_Don

References:

[The Securitization and Militarization of Daily Life]

[CSC]

[CACI]

[MPRI]

[SAIC]

[Data Mining]