Halliburton

Bob Herbert's NY Times op-ed this morning accuses Halliburton of using off-shore subsidiaries to avoid United States taxes:

Halliburton, in an S.E.C. filing in 2000, duly noted that it had a subsidiary incorporated in Vanuatu called Kinhill Kramer (Vanuatu) Ltd.

The company adamantly denies that its offshore subsidiaries are used to shift income out of the U.S. But it's indisputable that somebody is doing a dandy job of limiting Halliburton's tax liability. When I asked how much Halliburton paid in federal income taxes last year, a company spokeswoman, Wendy Hall, said, "After foreign tax credit utilization, we paid just over $15 million to the I.R.S. for our 2002 tax liability."

That is effectively no money at all to an empire like Halliburton. Less than pocket change. Dick Cheney must be having a good laugh over the way his old company, following his road map, is taking the U.S. for such a ride.

Wow. A subsidiary incorporated in Vanuatu. Only $15 million paid in 2002 taxes. Positive proof that Halliiburton is avoiding U.S. taxes. Right?

Well, maybe not. Kinhill was a pre-existing Australian construction company that was acquired by Halliburton in 1997. At that time, it was one of Asia's largest construction firms. In fact, a Google search reveals that prior to 1997, Kinhill had built a "Head Office" in Papua New Guinea, and had been obliquely involved in at least one case before the Supreme Court of Vanuatu. Herbert has literally no evidence whatsoever for implying that Halliburton created some sort of artificial subsidiary in the South Pacific so as to avoid paying United States taxes. Kinhill is a legitimate construction services company that serves the South Pacific and Asian regions, just as it did before being acquired by Halliburton.

Herbert is equally off the mark in complaining that Halliburton paid only $15 million to the United States government in 2002 taxes. While he characterizes $15 million as "less than pocket change" to an "empire like Halliburton," he neglects to mention that, according to financial data easily available on the web, Halliburton reported an operating income loss of $112 million in 2002, and a total net loss of $998 million. (The 2002 10-K is available here.) I'm not a corporate tax lawyer, and I don't know why Halliburton would have paid any income tax in 2002 given that it apparently had no income. But I certainly know more than Herbert, who seems to think that corporations pay taxes based on their revenues.

The real problem with Halliburton? Dick Cheney used to be the CEO. That's it. If he had headed up MTV prior to being Vice-President, the left would be constantly complaining about the latest season of The Real World and the lack of any good music videos these days.