Houston-based — er, . . I mean Bermuda-based, or is that Barbados-based? . . . — Nabors Industries, Inc. is one of the world’s largest drilling contractors. The company has nearly 600 land drilling rigs and more than 900 land workover and well-servicing rigs, and operates across the U.S. and in Africa, Canada, Central and South America, and the Middle East. Nabors’ offshore equipment includes platform rigs, jack-ups, barge drilling rigs, and marine support vessels, and the company provides oil field hauling, maintenance, well logging, engineering and construction services. In short, Nabors is the type of oil field service company that exploration and production companies want to have competing for the business of drilling or providing other services for an oil or gas well at the lowest possible price.
One of the reasons that Nabors has been one of the most profitable oil field service companies over the past 20 years or so is that its management team is constantly searching for ways to make the company more profitable and valuable to its shareholders. So, in 2001, Nabors moved its tax headquarters to Bermuda and its legal headquarters to Barbados to lessen its American income taxes. The move has paid dividends for Nabors shareholders as the company paid only $6 million in U.S. income taxes last year on almost $430 million in profits, which would have generated over $80 million more in taxes if Nabors were based in the U.S. Several other big companies have done the same thing as Nabors.
So, given the competitive advantage that Nabors and other tax haven-based companies have over their American-based competitors, you would think that Congress might get the message and simply reduce the tax regulation that prompted such moves. But that would be too easy. Rather than addressing the cause, a fierce debate developed in Congress with demagogues from both parties promising voters to crack down on “Benedict Arnold companies” such as Nabors that move to tax havens to avoid paying U.S. income taxes.

Continue reading →