The Double Irish With a Dutch Sandwich: What It Is, How Corporations Use It, and Its Impact on Global Taxes
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Summary:
The double Irish with a Dutch sandwich, a tax avoidance technique used by major corporations, involves intricate financial maneuvers through Irish and Dutch subsidiary companies to shift profits to low or no-tax jurisdictions. This article delves into the comprehensive details of this strategy, its historical context, the legislative responses, and its impact on corporations and global tax regulations.
What is double irish with a dutch sandwich?
The double Irish with a Dutch sandwich emerged as one of several international tax avoidance schemes. Its roots can be traced back to the late 20th century, gaining prominence due to globalization and the increasing digitalization of businesses. Tech companies, with their ability to assign intellectual property rights to subsidiaries abroad, became major users of this strategy.
Key components of the scheme
The technique involves a series of strategic financial moves. Firstly, profits are directed through one Irish company, then to a Dutch company, and finally to a second Irish company situated in a tax haven. This convoluted process allows corporations to significantly reduce their overall corporate tax rates.
Legislative response and changes
The year 2015 marked a turning point when Ireland responded to international pressure and public scrutiny by passing legislation to close loopholes associated with the double Irish with a Dutch sandwich. The new measures aimed to curb the use of this tax scheme for new plans, signaling a shift towards more transparent and responsible tax practices.
Impact on global corporations
Despite legislative changes, corporations with established structures continued to benefit from the old system until 2020. The scheme, when in full swing, facilitated the transfer of billions of dollars annually to tax havens. This not only affected national revenues but also raised ethical concerns about the responsibilities of major corporations in contributing to the societies in which they operate.
Conclusion
In conclusion, the double Irish with a Dutch sandwich has been a controversial tax avoidance strategy used by major corporations, particularly in the tech industry. While it provided a means to reduce corporate tax rates, it faced intense scrutiny and led to legislative changes in Ireland. The impact of such schemes on global corporations, national revenues, and ethical considerations continues to be a subject of ongoing discussion and regulatory evolution.
Frequently asked questions
How did the double Irish with a Dutch sandwich come about?
The strategy evolved as a response to globalization and the digitalization of businesses. It gained popularity, especially among tech companies, due to its ability to reduce overall corporate tax rates.
What legislative changes were implemented in 2015?
In 2015, Ireland responded to international pressure and public scrutiny by passing legislation to close loopholes associated with the double Irish with a Dutch sandwich. This legislation effectively put an end to the use of the tax scheme for new plans.
How did the scheme impact global corporations?
The scheme facilitated the transfer of billions of dollars annually to tax havens, affecting national revenues and raising ethical concerns about corporate responsibility. Despite legislative changes, corporations with established structures continued to benefit from the old system until 2020.
Are there ongoing discussions about international tax regulations?
Yes, the use of tax avoidance schemes, including the double Irish with a Dutch sandwich, has prompted ongoing discussions at both national and international levels. Governments and regulatory bodies are exploring ways to create a more transparent and equitable global tax framework.
What are the key components of the Double Irish With a Dutch Sandwich?
The technique involves directing profits through one Irish company, then to a Dutch company, and finally to a second Irish company situated in a tax haven. This complex process allows corporations to significantly reduce their overall corporate tax rates.
Key takeaways
- The double Irish with a Dutch sandwich emerged as a response to globalization and digitalization.
- Legislative changes in 2015 aimed to close loopholes associated with the tax avoidance scheme.
- The strategy impacted global corporations, raising ethical concerns and prompting ongoing regulatory discussions.
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