(CNN) -- Congressional investigators are in the Cayman Islands this week to determine if some U.S. businesses are taking a vacation from paying their taxes.
Sen. Max Baucus says a building in the Cayman Islands could be a cover for "shady tax transactions."
By establishing bogus headquarters in the British territory and in other nations, some American businesses are avoiding paying their share of federal taxes, according to the Senate Finance Committee, which requested that Government Accountability Office investigators visit the Caribbean islands.
A statement from the Cayman Islands government said officials welcome the GAO trip and view it as an opportunity to clear up "misperceptions about the role of Cayman's financial services sector relative to U.S. business interests."
As much as $300 billion a year in taxes goes uncollected by the government, and by some estimates more than a third of this may be related to corporations' reliance on offshore tax havens, according to some lawmakers.
"We know that some of the gap is the responsibility of entities breaking the law by funneling money to offshore locations at the expense of honest, hard-working Americans who pay their taxes," Sen. Max Baucus, D-Montana, said in a statement. "We need the GAO to determine fairly what's really happening with U.S. companies going offshore."
However, the GAO has noted problems with investigating offshore tax compliance in the past. In May, the investigative arm of Congress reported that such investigations were so time-consuming that they often outlasted the three-year statute of limitations for taxpayers involved in offshore financial activity.
The GAO suggested in the report that Congress make an exception to the statute of limitations for these types of probes.
Baucus, chairman of the Finance Committee, and other senators have been pressing for legislation to crack down on such havens.
Senate Bill 681 -- aka the Stop Tax Haven Abuse Act -- was referred to his committee in February 2007. If passed, it would "restrict the use of offshore tax havens and abusive tax shelters," according to the bill's summary.
In a news release last month, Baucus said there were myriad loopholes in the U.S. offshore tax evasion program and the Internal Revenue Service "could do a better job of measuring potential noncompliance."
One focus for the GAO this week will be Ugland House, a five-story building in George Town that is listed as the headquarters for thousands of U.S. and international companies.
Baucus said last year that while Ugland House is home to 12,748 companies, "this building does not house the operations of 12,748 companies." He asked the GAO, among other things, to find out "what business, if any, these corporations carry on in the Cayman Islands."
In requesting the GAO probe in June, Baucus called Ugland House "one of the most likely places shady tax transactions could be sheltered."
"If American companies are setting up shop at the beach just to avoid their tax obligations, we can't keep our heads in the sand," he said in a statement.
Investigators are scheduled to meet with the building's "primary tenant" during their visit, according to a Finance Committee news release. It did not elaborate other than to quote the committee's ranking member, Sen. Chuck Grassley, R-Iowa, saying that "it's good to have U.S. auditors and investigators with a neutral perspective try to find out what's really going on there."
Baucus' June letter to the GAO said only that Ugland House plays host to an international law firm.
Cayman Islands financial and tax officials also will meet with the GAO team, and one official said the visit provides "a unique opportunity" to demonstrate the legitimacy of the British dependency's financial industry.
The officials will give U.S. investigators technical briefings and background on financial services in the islands, according to a government statement.
"While the U.S. political context to the U.S. Congress' apparent interest in the Cayman Islands is contentious, we understand that the GAO prides itself on its objectivity and independence," said Kurt Tibbetts, head of the Cayman's government business department.
"On that basis and on the basis of our confidence in the credentials of our financial services sector, the GAO visit is regarded as a unique opportunity to set the record straight." E-mail to a friend