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How high tech companies use the “Dutch Sandwich” loophole to avoid billions in US taxes

Bloomberg News has a fascinating report out today about how Google, Facebook, IBM, Oracle and others shift billions in profits through Ireland to the Netherlands and then on to offshore tax havens like the Caymans. The end result? These US companies avoid billions of dollars in federal corporate taxes and avoid billions more of taxes in Europe. Another example that there’s one rule for the “little people” and another for those with millions or billions of dollars at their disposal. Small companies in the US have to pay full taxes on their earnings along with the rest of us individuals. It’s apparently only when we get really wealthy that we can shift money to Caymans and – legally – avoid paying our fair share of what it takes to support our democracy:

The earnings wind up in island havens that levy no corporate income taxes at all. Companies that use the Double Irish arrangement avoid taxes at home and abroad as the U.S. government struggles to close a projected $1.4 trillion budget gap and European Union countries face a collective projected deficit of 868 billion euros.

5 Comments

  1. Alex Morris

    October 22, 2010 at 3:57 pm

    Duh, if we lowered our corporate tax rates to match the rest of the world, these companies could bring a lot of this money back home to create jobs !

  2. Ron Santo

    November 14, 2010 at 10:22 pm

    Alex is correct. Google, Microsoft, et al would not avail themselves of these (legal) tax minimization strategies IF the U.S. taxed its corporations in line with the rest of the world.

    If the U.S. eliminated the IRS and adopted the Fairtax – in which corporations aren’t taxed at all, and individuals are “taxed” based on their consumption, foreign corporations would be flocking to the United States to establish real subsidiaries providing real jobs to U.S. citizens.

  3. Skip

    November 17, 2010 at 12:58 am

    Tax structure is not the silver bullet that people would have you believe. Tax represents just one part of the whole equation that any business worth its salt will investigate in doing its due diligence. Cost of real estate, raw materials, labor, utilities, services, transportation, etc., create a much richer picture than simply repeating the fair tax mantra and hoping some of it sticks.

    The thing that makes it easy to go to the Caymans, for example, is that you can sometimes exist in country with as little as a bank account, postal box and maybe an answering service.

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    December 28, 2010 at 12:01 pm

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  5. keisha

    July 6, 2011 at 11:13 am

    Tax is simply killing the business, that’s for sure.