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Friday, October 21, 2016

If you had to hire an outside company to run the Patient Protection and Affordable Care Act’s enrollment website, which would you rather have: a goody-two-shoes outfit that doesn’t know what it’s doing or a competent, well-known consulting firm that makes liberal use of offshore tax havens?

The best choice is neither, of course. Ideally, the U.S. government would set a good example and pick a skilled U.S. contractor that isn’t a poster child for clever tax shelters. Instead, the job of taking over construction of, which failed miserably when it debuted in October, is going to Accenture Plc, which switched its place of incorporation in 2009 to Ireland from Bermuda. It will replace Montreal-based CGI Group Inc., which got the blame for many of the website’s early problems.

It was only last May that the Senate Permanent Subcommittee on Investigations held hearings excoriating Apple Inc., which is based in Cupertino, California, over its use of Ireland as a tax haven. So it’s a bit surprising to see that hardly anyone is complaining about the Accenture hire. This may be an example of an orphan controversy. It’s sitting there waiting for someone to make a big deal of it, but there aren’t many politicians with an interest in doing so — even on a hot-button subject as politicized as Obamacare.

Democrats in Congress generally don’t want to be seen badmouthing the White House or the Affordable Care Act. Many Republican lawmakers (and plenty of Democrats, too) may be reluctant to criticize corporate tax dodges. For instance, Senator Rand Paul of Kentucky, a reliable Tea Party basher of Obamacare, spent much of his time at last year’s Senate hearing defending Apple’s use of offshore refuges to avoid U.S. taxes.

Accenture has endured so much criticism over the years for its use of tax havens that it even has a disclosure in its annual report warning investors to expect as much.

“Some companies that conduct substantial business in the United States but which have a parent domiciled in certain other jurisdictions have been criticized as improperly avoiding U.S. taxes or creating an unfair competitive advantage over other U.S. companies,” Accenture said. “Accenture never conducted business under a U.S. parent company and pays U.S. taxes on all of its U.S. operations. Nonetheless, we could be subject to criticism in connection with our incorporation in Ireland.”

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  • Independent1

    Here’s some background on Accenture from wikipedia that’s not included in Jonathan’s article:

    Accenture plc is a multinational management consulting, technology services and outsourcing company. Incorporated headquarters are in Dublin, Republic of Ireland while operations headquarters are in Chicago, Illinois. It is the world’s largest consulting firm as measured by revenues[2] and is a constituent of the Fortune Global 500 list.[3] As of 31 August 2013, the company reported revenues of $30.39 billion with approximately 275,000 employees, serving clients in more than 200 cities in 56 countries.[1][4] Accenture has more employees in India than any other country, with approximately 80,000 employees projected by August 2012. In the US, it has about 40,000 employees and 35,000 located in the Philippines.[5] Accenture’s current clients include 89 of the Fortune Global 100 and more than three-quarters of the Fortune Global 500.[6] Since September 1, 2009 the company has been incorporated in Ireland.[7]

    One reason the White House may have chosen Accenture to take over from CGI is because as it notes in the background: “It is the world’s largest consulting firm as measured by revenues[2] and is a constituent of the Fortune Global 500 list.[3] As of 31 August 2013, the company reported revenues of $30.39 billion with approximately 275,000 employees”; which should imply that Accenture has the background and personnel resources to actually fix the Obamacare website.

    Although, I’m a little bothered by Accenture incorporating in Ireland, as Jonathan noted at the end of his article, Accenture does have a fairly large American operation (40,000 employees) that is based in Chicago, on which they say they do pay American taxes for the consulting services they do in America. Obviously being incorporated in Ireland does allow them to shield a lot of income from taxation, but that seems to have become the norm for today’s businesses (because of America’s convoluted tax code); and given that in any given year, more than 200 of the Fortune 500 pay zero taxes; if Accenture even ends up paying some positive net taxes on the business they do in America – that’s at least something; which is why maybe Democrats in Congress aren’t making a big deal of the White House chosing the world’s largest consulting company based on revenues to work at fixing a very controversial healthcare website.

    • Dominick Vila

      Great post. The only thing I would add is that most “American” corporations are actually multi-nationals, loyal only to their shareholders, and that trying to find a large corporation in the USA that does not use foreign tax havens, and that benefits from loopholes, is almost an impossibility.

      • Independent1

        And unfortunately, it’s not just multi-nationals that have gotten into the practice of using foreign tax havens, it also appears to having become a practice that many of the wealthy use and even smaller totally US companies. About the only way I can see to change that would be to vote in enough progressive Democrats in 2014 who would be inclinded to work at changing our convoluted tax code; but even that would be risky, as they would have to change the code in way that wouldn’t just encourage more companies to incorporate off shore; and/or just encourage companies to reduce their US operations and move more of their business off shore (certainly, we don’t want to drive more companies and their operations, or even wealthy people, out of America).

        • Allan Richardson

          If the law were crafted as “you can sell your products in the US without tariffs if you incorporate in the US, hire a minimum percentage of US citizens to work in your US facilities, and pay taxes on income from sales in the US,” there would be an incentive NOT to go offshore, Of course, some companies would give up US sales in order to save money, but that would open up markets for others to make more by staying in (or moving to) the US.

        • Dominick Vila

          Indeed, we need more Elizabeth Warrens in the Senate and the House to end the Wall Street abuses and fraudulent activities, change our tax code, and mitigate the probability of another economic crisis.

  • dpaano

    I’m sorry, but I just can’t believe that we can’t find a company in the U.S. that can do this work and isn’t using a tax haven to do it. There should be some law that when we send out bids for work for the U.S. Government, the company HAS to be domiciled in the U.S. and have at least 50% or more of the work done in the U.S. It should also NOT be allowed to use another country as a tax haven!