Shoo-be-doo-be Dubai, bai....
Oil services giant Halliburton is moving its CEO to Dubai, where there are friendlier tax laws. Officials at the company formerly run by Dick Cheney strongly deny that has anything to do with its decision.
Of course, Democrats sharply criticized the move, even if the tax dodging issue is not clear. North Dakota Senator Byron L. Dorgan even wondered if Halliburton is trying to run away from bad publicity on their contracts.
As you may recall, Halliburton was awarded more than $19 billion in Pentagon contracts through it Kellogg, Brown and Root (KBR) units, which made it sole provider of food and shelter services to the military in Iraq and Afghanistan.
(Picture above from bigpicture.typepad.com; picture below from villagevoice.com)
Are critics singling out Halliburton unfairly? After all, as the Associated press reports, "Western businesses have been pouring into Dubai to capture regional energy revenues and take advantage of some of the world's most liberal tax, investment and residency laws. Dubai charges no corporate or income tax and in many cases allows companies no restrictions on repatriating profits or importing employees."
So the question is:
If Halliburton saves U.S. tax money through the move, how much?
In the short term, "not much," writes Michelle Tsai in Slate. "The company is still incorporated in Delaware and remains subject to U.S. law and taxes."
Still, Tsai goes on to say: "the move to Dubai could save Halliburton (and CEO Dave Lesar) some money on foreign taxes."
"With operations in 100 countries, Halliburton had to pay out $289 million to foreign governments last year. The United Arab Emirates government may have sweetened the deal with favorable real-estate terms or other incentives. Dubai's Jebel Ali Free Zone, which already houses more than 5,000 foreign-owned businesses, doesn't impose corporate or personal income taxes and has a robust workforce with no minimum wage. The labor advantage could even convince Halliburton to eventually close the Houston office as the North American business shrinks. After 2008, about 55 percent of Halliburton's services business will come from the Eastern Hemisphere—up from just 40 percent in 2006."
Halliburton has its defenders, though, such as Rep. Spencer Bachus, R-Alabama. He said the argument that it's wrong to do business with Dubai or for a company to move its headquarters there risks alienating one of the strongest U.S. allies in the Middle East. 'We need to consider that Dubai is a strong ally in a region of the world (where) we need strong allies desperately,' he said in an interview.
Where was that argument in the Dubai Ports deal last year? When it was revealed that a Dubai-owned firm bought operations in six U.S. ports last March, the Republican Congress voted to force Dubai to sell the U.S. ports.
Security matters aside, there are possible economic implications. Marketwatch reports some market strategists say the move would bring substantial benefits to Halliburton shareholders, but it may prove hurtful for the U.S. economy and the dollar in the long term.
Today's opinion piece in the New York Times on the subject: The Death of Geography?
Just in case you want to visit Dubai but don't have deep pockets, the NYT has some tips on how to visit the emirate on a budget.
