SPECIAL REPORT: Storage Giants Abuse Tax Havens

Do you think that EMC, SanDisk, Seagate or WD have a total of 64 subsidiaries in Barbados, Bermuda, Cayman Islands, Delaware, Ireland, Luxembourg, Virgin Islands to sell their products in these countries. Of course not. They are located there for fiscal reasons only.

A tax haven is a state, country or territory where, on a national level, certain taxes are levied at a low rate or not at all.

We chose five of the biggest storage companies for this analysis – EMC, NetApp, SanDisk, Seagate and WD – and looked at their annual 10Q SEC filing to list their subsidiaries – see below – in tax havens.

Number of subsidiaries of top 5 storage giants in tax havens

(Source: StorageNewsletter.com)

We then send an email to a member of the corporation communication of each company with the following text: “I have remarked that your company has several subsidiaries in Bermuda, Cayman Islands, Ireland, Luxembourg, Virgin Islands and in the Delaware US state, these locations not being known as big markets to sell storage products. So what for?“

We were not waiting for a lot of answers. We just got two:

• EMC’s Katryn McGaughey: “I will be traveling for work beginning Monday, March 9 and returning late afternoon on Wednesday, March 12.” Nothing else followed this email.
• WD’s Steve Shattuck: “As is the case with many global technology companies, Western Digital Corporation maintains subsidiaries in many jurisdictions around the world to most effectively and efficiently operate our business.”

That’s exactly why companies are installed in tax havens, to most effectively and efficiently operate business. But financial business only, which means greatly reducing taxes to be more profitable and to distribute more money to shareholders. The biggest loser here is the U.S. Internal Revenue Service responsible for tax collection and consequently the US government with less money to accomplish its mission.

In recent years, the United States has campaigned against international tax havens that assist multinational corporations in reducing their U.S. tax liabilities. Storage companies were not convinced.

In our list of tax havens, we added U.S. state of Delaware and Ireland.

Delaware law tends to protect the rights of boards of directors and shareholders. It’s a domestic tax haven. The state provides an infamous exemption from its corporate income tax for so-called Delaware investment holding companies. This is a Delaware corporation whose activities are limited to holding intangible assets.

Ireland is a tax haven but also a country where storage companies, like EMC or Seagate, have manufacturing plants. But it was not the reason Seagate’s board of directors approved changing the company’s incorporation Seagate from the Cayman Islands to Dublin, Ireland in January 2010, even if its principal executive office is based in Cupertino, CA.

Note finally that NetApp has only one tax haven, in Delaware, and that the use of these tax havens do not concern only storage firms but about all the international companies in the world.

EMC’s companies in tax havens

In Barbados
Documentum F.S.C.
Documentum Ireland Holdings Limited

In Bermuda
General Risk Insurance company Ltd.

In British Virgin Islands
Data General BVI, Ltd.
Smart Storage Global Ltd.

In Cayman
Legato Global, Inc.
System Management ARTS (Cayman Islands) Incorporated
VMware International

In Delaware
Data General International, Inc.
Documentum Canada Holdings, Inc.
EMC International U.S. Holdings, Inc.
EMC Investment Corporation
EMC Puerto Rico, Inc.
Flanders Road Holdings LLC
VMware Global, Inc.
VMware, Inc.
Woodland Street Partners, Inc.

In Ireland
VMware Bermuda Limited Ireland

In U.S. Virgin Islands
McDATA International, Inc.

NetApp’s company in tax haven
NetApp, Inc. in Delaware

SanDisk’s companies in tax havens

In Cayman
SanDisk (Cayman) Limited
SanDisk (Cayman) Limited

In Delaware
SanDisk, Delaware
SanDisk Corporation
SanDisk 3D LLC
SanDisk Secure Content Solutions, Inc.

In Ireland
SanDisk Manufacturing
SanDisk International Limited
SanDisk (Ireland) Limited

Seagate’s companies in tax haven

In Cayman:
Seagate Technology HDD Holdings
Seagate HDD Cayman
Seagate Technology International
Seagate Memory Products International
Seagate Technology Asia Holdings
Seagate Technology China Holding Company
Seagate Technology (Ireland)
Seagate Technology Media (Ireland)
Seagate Technology (Malaysia) Holding company
Seagate Singapore International HQs Pte. Ltd
Lyve Minds LLC

In Ireland
Seagate Technology (Dublin Branch)
Seagate Technology Republic Ireland Limited

In Luxembourg
Maxtor Luxembourg S.àr.l.

In Delaware
Seagate Technology LLC
Seagate Air, LLC
Redwood Acquisition Corporation
Seagate US LLC, Delaware

WD’s companies in tax havens

In Cayman
STEC R&D Ltd.
Western Digital International Ltd.
Western Digital Ireland, Ltd.

In Delaware
WD
Arkeia Software SARL
Arkeia Software, Inc.
HGST, Inc.
Keen Personal Media, Inc.
Read-Rite International
RS Patent Holding Corporation
SimpleTech, LLC
Virident Systems Australia PTY Limited
WD Media, LLC
Western Digital (Fremont), LLC
Western Digital Capital, Inc.
Western Digital Latin America, Inc.
Western Digital Technologies, Inc.