[HN Gopher] The Double Irish Dutch Sandwich: End of a Tax Evasio...
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The Double Irish Dutch Sandwich: End of a Tax Evasion Strategy
Author : speckx
Score : 76 points
Date : 2024-09-17 19:51 UTC (3 hours ago)
(HTM) web link (conversableeconomist.com)
(TXT) w3m dump (conversableeconomist.com)
| exabrial wrote:
| I'm not really mad at companies for doing this, I'm sad that the
| same ways are not available to ordinary overtaxed people.
| dvh wrote:
| As designed
| Mordisquitos wrote:
| Maybe part of the reason ordinary people are "overtaxed" is
| that companies are able to do this.
| yieldcrv wrote:
| Given that 100% tax compliance at the highest rates would not
| solve any high tax nation's budget holes
|
| You should be asking the same questions that companies are
| asking: instead of "why arent we getting hosed equally" its
| "why are we getting hosed at all"
| mystified5016 wrote:
| Capitalism only works if _someone_ gets hosed. And of
| course as we all know, the only alternative to capitalism
| is communism which is scary and evil! Don 't you see how
| good you have it under the hose?
| tirant wrote:
| Given the nature of the human being, there's no way to
| live in a free society without someone being hosed. And
| even then, capitalism has improved the life conditions of
| those hosed. Communism removes the freedom for everyone
| and it is effectively hosing everyone at the same time.
| SiempreViernes wrote:
| That's not true, Soviet communism generated wealthy
| elites just like any other dictatorship, they just didn't
| have formal wealth.
| nabla9 wrote:
| Improving IRS tax collection enforcement could generate
| significant funds
|
| In fiscal year 2021 the IRS managed more than $4.1 trillion
| in tax revenue. The annual tax gap was estimated at $688
| billion in 2021, with $625 billion remaining uncollected
| even after enforcement efforts.
|
| 16.7 percent.
| yieldcrv wrote:
| and you don't realize that this proves my point?
|
| ~$5.3 trillion doesn't solve the US' budget holes, while
| the US government tells you what transactions to make to
| not be taxed
| intuitionist wrote:
| So collecting all those extra taxes would cover somewhere
| south of 25% of the budget deficit for 2021. You aren't
| wrong, but the parent isn't wrong either.
| kvgr wrote:
| And most important questions: why is the government so
| expensive, do we really need all of this, is it efficient?
| How is the efficiency evaluated?
| epolanski wrote:
| I really despise some of these anarcho capitalist
| arguments.
|
| A society that isn't lifted by redistributing wealth
| through taxes creates nothing but a more inequal and
| dangerous society for everyone.
|
| We can all argue about inefficiencies, what is the right
| amount of spending and funding, but redistributing taxes
| by creating socially needed projects, from roads that you
| use, to ports through your shipments to policing streets
| so your daughter is safer when she goes out with friends.
| The list is so long.
|
| People don't even realize how much wealth and prosperity
| has been created by redistributing wealth through taxes.
| VieEnCode wrote:
| "Given that 100% tax compliance at the highest rates would
| not solve any high tax nation's budget holes"
|
| Can I ask where this claim originated from please?
| yieldcrv wrote:
| yeah absolutely, I look at the nation's debt load - which
| it does pay interest on from tax revenues - and its
| increase of debt load alongside actual spending of debt
| sale proceeds, and compare that to how much it collects
| in taxes
|
| I use that government's official sources to do that math
|
| Additionally, in some nations, there are underfunded
| liabilities, future necessary spending
|
| And it all far eclipses what the nation makes in revenue
| from taxes, tariffs and productive industries it owns -
| if any
|
| If there an aspect of accounting that I'm
| misunderstanding, by all means enlighten me
| fleabagmange wrote:
| No it's because an un-elected class of political invents new
| ways to launder our money over and over. How else does a
| politician with a small salary end u on millionaire over and
| over? They do not get book and consulting deals out of the
| goodness of the public hearts
| knodi123 wrote:
| It's fine to believe this. But you should be aware it's a
| partisan political opinion, and it's inflammatory to
| present it as an objective fact. Is this site really the
| place for partisan political opinions?
| Mountain_Skies wrote:
| @knodi123, what is partisan about fleabagmange's statement?
| They don't mention any politician, political party, or even
| political ideology.
| 9dev wrote:
| Well, apart from medicine, irrigation, health, roads,
| cheese and education, baths and the Circus Maximus, what
| have the Romans ever done for us?
| earnesti wrote:
| Ordinary people can buy the stock of the said companies and
| benefit from the tax saved. Probably they already own them
| through pension funds.
| consp wrote:
| Ordinary people do not buy stock. Most people here are in the
| highest percentile and it shows.
| amarcheschi wrote:
| That take feels kinda... Detached from the average person
| to me? I don't know how to take it, just like when you hear
| gates saying a banana cost 10$. Common Joe would benefit
| much more from taxes being actually paid than profits being
| accumulated by companies just so they can crush the
| competition more and earn more and (...)
| thaumasiotes wrote:
| > just like when you hear gates saying a banana cost 10$
|
| When was that?
| amarcheschi wrote:
| I've never seen a real video, it may as well be a common
| saying after being on the internet for a so long time.
| However, there is a video of gates trying to guess
| grocery prices on the internet, and he's not that bad. I
| think at this point it's just an internet meme that exist
| to reference billionaires being disconnected from reality
| thaumasiotes wrote:
| > I've never seen a real video, it may as well be a
| common saying after being on the internet for a so long
| time.
|
| I mean, I can show you the video:
| https://www.youtube.com/watch?v=Nl_Qyk9DSUw
|
| But that has nothing to do with Bill Gates or any other
| person named Gates. (You might be aware that Bill Gates
| isn't a woman.) It's a joke on a comedy show. It's not
| something anyone has ever said.
| ImJamal wrote:
| I don't know about the majority, but plenty of people have
| 401Ks (over 34%). It wouldn't be too shocking if 16% more
| people had stocks.
| amarcheschi wrote:
| Which, to me, looks very subpar rather than companies paying
| taxes in the country where they actually make profit
| g8oz wrote:
| That's what I call a "let them eat cake" response.
| lxgr wrote:
| They can't, because companies these days only go public after
| most of their growth has already been captured by private
| equity (if at all).
| toast0 wrote:
| Ordinary people can't do this because they missed the window,
| but also because their labor has a clear nexus. This scheme
| worked because when a product is designed in one locale, built
| in another, and sold in a third, there's some reasonable
| question of what the nexus of the income is.
|
| Ordinary people that have written books or songs or otherwise
| earn royalties from creative works on a regular basis could
| probably have arranged for ownership of their royalties to be
| owned by a complex corporate structure as well, but I don't
| know that very many ordinary people earn enough in royalties
| that tax avoidance is worth the setup and maintenance costs.
| epolanski wrote:
| I personally am.
|
| Because people are often overtaxed due to high tax
| elusion/avoidance/evasion.
|
| E.g. in Italy, around 10 to 15% taxes are evaded in many ways.
| That bill is then paid by regular taxpayers.
|
| If even more people avoided taxes that would just make the
| issue worse.
| throw310822 wrote:
| Frankly I don't even understand why companies are taxed at all.
| Taxes are proportional to individuals' income so that the pain
| of contributing to the collective good is distributed fairly.
| Companies don't feel any pleasure or pain, they need money as a
| commodity- it pays people, investments, innovation, talent.
| Money and other benefits should be taxed when they are
| transferred to individuals, not before.
| sanj wrote:
| " The obvious loss is to government revenue, but the more subtle
| and still very real loss is the diversion of high-powered talent
| from what could have been gains in efficiency and productivity to
| focus instead on corporate reorganizations and tax evasion
| games."
|
| I'd expect very little overlap between those talent pools.
| mtnGoat wrote:
| Why? Talent goes where to best pay is, if you're not paying
| taxes you can pay your agent more.
| immibis wrote:
| How many computer programmers moonlight as tax avoidance
| accountants?
| tux3 wrote:
| Tax avoidance is a legal problem instead of a tech problem,
| but it has many parallels wherever there are bad
| incentives. These are fundamentally not pro-social
| activities, but trying to get an unfair advantage through
| loopholes.
|
| More computer programmers might moonlight as SEO gurus, if
| search engines didn't put up at least a token amount of
| resistance against scummy low-effort SEO tactics.
|
| Fewer tax avoidance accountants would still be tax
| avoidance accountants, if we made a bigger effort to
| prevent it. (And that doesn't mean accountants would have
| to be programmers instead, there are many other kinds of
| talent)
| smallnamespace wrote:
| High finance and crypto are two places where a high
| concentration of technical skills intersect with using
| those same skills to game our financial and legal systems.
| jacobr1 wrote:
| More like how many people with degrees in Business go into
| Management Consulting, would like to join a startup as a
| Product Manager, or accountants that want to be Associates
| at a VC firm rather than work a big 4.
|
| But even for programmers, plenty of people make the
| decision to go into programming or medicine or law because
| they are well paid and respected careers. And interests in
| secondary school and university are influenced by parents,
| teachers and the culture promoting certain directions. Kids
| these days are bombarded by STEM everything.
| tombert wrote:
| Tangential, but a pet project I've been working on has been
| doing exactly that! Looking at US federal tax laws and
| using constraints solves to find optimal paths to the
| lowest taxes.
|
| I don't really do anything besides play with it, my taxes
| are very simple and boring, but it's been a fun project to
| play around with.
| chris_wot wrote:
| Yeah, that is tax minimization, not tax avoidance.
| There's a big difference.
| tombert wrote:
| Yeah, that's fair enough; outside of keeping as much
| money as I can in ETFs and index funds, my tax strategies
| are pretty much non-existent since I don't have enough
| money for it make a huge difference.
| quesera wrote:
| If there are any novel or situation-specific conclusions
| drawn, that sounds like an easy sell to CPAs and
| independent tax preparers. Maybe even individual tax
| optimizers.
|
| My naive assumption is that sophisticated analysis will
| return the same few well-known recommendations almost all
| the time. (The taxation variant of: eating properly,
| sleeping regularly, and getting appropriate exercise)
| jdminhbg wrote:
| Very big! Minimization is when I do it, avoidance is when
| Apple does it.
| NewJazz wrote:
| [delayed]
| NewJazz wrote:
| In the short or long term?
| barrkel wrote:
| The word chosen at the end of the article:
|
| > _I'm sure the international tax lawyers around the world are
| strategizing new tax evasion strategies even as I write these
| words._
|
| It should be clear that tax avoidance and evasion are quite
| different things, and the Double Irish Dutch Sandwich was tax
| avoidance and not evasion.
| immibis wrote:
| This is a technicality created by legal tax evaders. To evade
| is to avoid. If you're avoiding tax you're evading tax.
| Sometimes it's moral, many times it's legal.
| yieldcrv wrote:
| Its a technicality created by government tax authorities and
| prosecutors
|
| They say avoidance is legal, evasion is illegal and the name
| of a prosecutable crime
| Alupis wrote:
| So are you telling us when you prepared your recent tax
| return, you spent zero time ensuring you paid only the
| required amount?
|
| Avoiding paying taxes you are _not legally required to pay_
| is not tax evasion.
| pdpi wrote:
| There will always be legal (but arguably immoral) ways to
| minimise your taxes, and there will always be illegal ways to
| minimise your taxes. Those are different problems with
| different solutions. It's a useful distinction to make, that
| warrants having different words.
| DavidAdams wrote:
| The word evade has a specific meaning in English, implying
| avoidance by trickery. And it has a specific legal meaning,
| which is knowingly bending or breaking the law. They are not
| synonyms, especially in a tax context.
| kgermino wrote:
| Is that fair to say given that it's been found illegal?
|
| It's more complicated because the Irish law people were
| following was found to be invalid, not that the people
| leveraging it we're breaking the law as understood at the time,
| but it still seems unfair to call this approach legitimate.
| Alupis wrote:
| > Is that fair to say given that it's been found illegal?
|
| Those activities were not illegal at the time. If the laws
| have changed, then as a tax paying entity, these
| people/businesses will have to comply with the new laws
| and/or remove themselves from the jurisdiction where these
| laws preside.
| ManuelKiessling wrote:
| Well, if I eat a steak this year and eating animals is made
| illegal next year, was it legitimate that I ate a steak this
| year?
| chris_wot wrote:
| It would be legitimate. If you ate an animal thinking it
| was lawful, but it was not lawful, then it would not have
| been legitimate.
| gwd wrote:
| > The obvious loss is to government revenue, but the more subtle
| and still very real loss is the diversion of high-powered talent
| from what could have been gains in efficiency and productivity to
| focus instead on corporate reorganizations and tax evasion games.
|
| It's also a loss to all of us who find ourselves owning a
| "foreign" corporation for legitimate reasons, and having to do a
| lot of work proving that we're not playing shell games.
|
| I'm an American living in the UK; I've started what's now a one-
| man bootstrapped company and it just makes sense for it to be
| incorporated in the UK. I don't mind paying taxes, but I don't
| want to have to pay them twice. UK taxes are generally higher
| than US taxes, and there are tax treaties to avoid double
| taxation, so no problem, right?
|
| Wrong. First, if a US citizen owns more than 10% of a foreign
| corporation, there's an insanely complicated form you have to
| fill out, two pages of which are incomprehensible questions ("Is
| your company considered an X corporation under sections Y and Z
| of the Blablablah act?") that simply require an expert to fill
| out.
|
| Secondly, if a US citizens owns more than _50%_ of a foreign
| company, by default, income from that company counts as personal
| income, _but taxes paid by the company to another government don
| 't count as personal taxes_. You can get around this, apparently,
| but it's even more complicated.
|
| So because of [REDACTED] lawyers and accountants that have come
| up with these schemes, I have to spend precious starting capital
| to a bunch of accountants to prove I'm not evading taxes, rather
| than actually doing something useful with that money (and that
| accountant doing something more useful with their time).
| jmyeet wrote:
| This is completely unrelated to the post.
|
| What you're complaining about is overreach by the IRS in
| relation to foreign assets held by US citizens (ie FATCA) and
| the reporting requirements (eg Form 7938 and FBAR). It's worth
| noting that real estate is carved out as an exception for
| reporting purposes somehow, even though it's a common vehicle
| for money laundering.
|
| That has literally nothing to do the Double Irish Dutch
| sandwich, which has historically been used by US companies
| (particularly Big Tech companies) to avoid taxes by moving
| their IP to a foreign subsidiary and then paying "royalties" to
| avoid paying US taxes.
| gwd wrote:
| You seem to think that the IRS doing that just for a laugh,
| or just because they hate rich people, and that Big Tech
| companies are the only ones playing shell games with their
| revenue in order to shirk paying their fair share to support
| the society they've benefitted from.
|
| I think it much more likely that rich people also play shell
| games with their assets / revenue to avoid paying their fair
| share to support the society they've benefitted from, and
| that the IRS requires the extra reporting to try to
| counteract that.
|
| This article is specifically about a specific loophole
| invented by unethical accountants and lawyers, but it's also
| generally about all the effort spent by unethical accountants
| and lawyers to come up with such loopholes, causing not only
| harm to society (in the form of free-riding on those who are
| paying taxes), but which in turn forces effort on the part of
| tax agencies and legislatures, which then forces effort on
| normal people like me who just want to make some money and
| pay our fair share. It's pure wasted energy.
| skissane wrote:
| > and that the IRS requires the extra reporting to try to
| counteract that.
|
| The extra reporting largely exists because of the
| fundamental and rather unique misdesign of the US tax
| system - taxing citizens' worldwide income for life. Most
| countries only tax (1) worldwide income for residents (2)
| in-country income for non-residents
| skissane wrote:
| > What you're complaining about is overreach by the IRS in
| relation to foreign assets held by US citizens (ie FATCA) and
| the reporting requirements (eg Form 7938 and FBAR)
|
| A big problem is the US is one of the few countries in the
| world which taxes its citizens (and green card holders)
| worldwide, for life, no matter how long they've been outside
| the United States. Most countries don't tax non-resident
| citizens, or only do so for a limited period of a few years.
|
| The only other country that does it, that I know of, is
| Eritrea - and it has been widely condemned by the
| international community for its "diaspora tax". But no
| condemnation for the US diaspora tax, despite actually being
| far more onerous than Eritrea's is
| jmyeet wrote:
| The complexity in the tax code is why we end up with things like
| AMT (Alternative Minimum TAx) and the 15% minimum corporate tax.
| There are so many carved-out special interest exceptions that
| it's almost impossible to unravel, like the carried interest tax
| credit for hedge fund management fees.
|
| I think we've reached the point where we need revenue
| apportinment of profit. That means if 50% of your revenue comes
| from the US, then (at least) 50% of your profit is taxable in the
| US.
|
| It's worth noting that there are various schemes for
| multinationals to avoid taking profits in the US. One of the most
| common is transfer pricing. Example: Company A sells sofas to US
| consumers for $1000. It buys them from subsidiary B (in Bermuda)
| for $900. Subsidiary B buys the sofas from Subsidiary C in China
| for $300 each. So $600 in profit is moved to a 0% tax haven like
| Bermuda. That's transfer pricing and it's illegal.
|
| The Double Irish Sandwich is an example of profit shifting.
| What's the difference between profit shifting and transfer
| pricing? Profit shifting is legal. Transfer pricing isn't. That's
| functionally the difference.
|
| So an argument against revenue appointment of profit is you can
| use similar schemes to hide profits but you really can't. For
| one, companies need to report profits to shareholders so the IRS
| has that data point. For another, the IRS can and does go after
| companies to figure out beneficial ownership and whether
| transactions really are at arm's length or not.
|
| For anyone saying they can benefit from this by buying shares in
| $BIG_TECH$, I promise you that you would benefit more from that
| company paying taxes to fund the roads, bridges and schools that
| you would from your 100 shares going up by an extra 1%.
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