Hundreds ofEnron Companies in Cayman
The name of Cayman has come up as a leadingoffshore jurisdiction used by the American corporation now engulfedin financial scandal to escape payment of taxes.
A New York Times report said the companyescaped paying taxes in four of the last five years by applyingthe technique of opening subsidiaries in low-tax jurisdictions,with the Cayman Islands being the leading territory having 692of the Enron companies.
The New York Times report of last week didhowever say such methods are applied by many companies and evenquoted a corporate lawyer stating that the practice was not illegal.
"The company used strategies commonamong businesses to avoid taxes. It also used some unusual methods,among them the creation of 881 subsidiaries abroad, including692 in the Cayman Islands, 119 in the Turks and Caicos Islands,43 in Mauritius and 8 in Bermuda," the newspaper said.
It listed six such companies also beingin Barbados, four in Puerto Rico and one in the British VirginIslands.
The New York Times quoted an internationallawyer speaking on condition of anonymity justifying the Americantax avoidance strategy.
"You certainly do not want to pay U.S.taxes on income earned in another country. It is neither illegalnor unethical," he said.
According to the newspaper, internationaltax experts said corporations create offshore subsidiaries intax havens for many legitimate reasons, including keeping profitsearned overseas from being taxed in the United States, avoidingAmerican regulation and insulating foreign business partners fromAmerican law.
"Enron is by no means alone in notpaying income taxes. A small but growing percentage of large companiespays no income taxes, a study by Citizens for Tax Justice showedin October 2000. The study of half the Fortune 500 companies foundthat 24 owed no tax in 1998, up from 13 in 1997 and 16 in 1996,"the paper said.
Enron, a company that traded in energy,was embroiled in scandal after becoming one of the largest U.S.companies to file for bankruptcy. At the time of its 2 Decemberannouncement it laid off 4,000 workers.
Since federal investigators forced the companyin November to take off its books some US$600 million in profitit had claimed Enron has been the focus of a growing disgracethat ensnared an accounting firm. Additionally, the names of leadingAmerican politicians are being associated with the company eitherthrough receipt of campaign contributions or some other affiliation.