iTax Avoidance - Why In America There Is No Representation Without "Double Irish With A Dutch Sandwich" Taxation

Tyler Durden's picture

Back in October 2010 we presented an analysis by Bloomberg which showed not only that courtesy of not paying taxes at its statutory rate of 35% Google was adding about $100/share to its then stock price of $607/share, but just how this was executed. Now, it is the turn of Apple, with its $110 billion in cash, to fall under the spotlight, with an extended expose in the NYT titled "How Apple Sidesteps Billions in Taxes" in which we learn that, shockingly, if you are at a table with only corporations sitting to your left and right, then you are the only person in the room paying taxes. Why - because global corporate tax "avoidance" schemes are not only perfectly legal, but they are actively encouraged, and in some cases form the backbone of a sovereign's (ahem Ireland) economic and even domestic policy, which just happens to be front and center in virtually every global corporate org chart permitting virtually the entire elimination of cash taxation at the corporate level.

As a reminder, here is what the Google tax avoidance structure looked like 2 years ago (and hasn't changed one bit since):

Now we find that Apple is also a material beneficiary of Irish tax creativity, which in turn has allowed the company to promptly raise a cash horde which may soon rival that of the Federal Reserve (and the Fed prints its money).

The NYT summarizes:

Apple was a pioneer of an accounting technique known as the “Double Irish With a Dutch Sandwich,” which reduces taxes by routing profits through Irish subsidiaries and the Netherlands and then to the Caribbean. Today, that tactic is used by hundreds of other corporations — some of which directly imitated Apple’s methods, say accountants at those companies.


Without such tactics, Apple’s federal tax bill in the United States most likely would have been $2.4 billion higher last year, according to a recent study by a former Treasury Department economist, Martin A. Sullivan. As it stands, the company paid cash taxes of $3.3 billion around the world on its reported profits of $34.2 billion last year, a tax rate of 9.8 percent. (Apple does not disclose what portion of those payments was in the United States, or what portion is assigned to previous or future years.)


By comparison, Wal-Mart last year paid worldwide cash taxes of $5.9 billion on its booked profits of $24.4 billion, a tax rate of 24 percent, which is about average for non-tech companies.

"Double Irish" is so popular it even has its own Wikiedia entry:



Typically, the company arranges for the rights to exploit intellectual property outside the United States to be owned by an offshore company. This is achieved by entering into a cost sharing agreement
between the U.S. parent and the offshore company, in the terms of U.S.
transfer pricing rules. The offshore company continues to receive all of
the profits from exploitation of the rights outside the U.S., without
paying U.S. tax on the profits unless and until they are remitted to the


It is called "The Double Irish" because it requires two Irish
companies to complete the structure. The first Irish company is the
offshore company which owns the valuable non-U.S. rights. This company
is tax resident in a tax haven, such as Bermuda or the Cayman Islands.
Irish tax law provides that a company is tax resident where its central
management and control is located, not where it is incorporated, so
that it is possible for the first Irish company not to be tax resident
in Ireland. The first Irish company licenses the rights to a second
Irish company, which is tax resident in Ireland, in return for
substantial royalties or other fees. The second Irish company receives
income from exploitation of the asset in countries outside the U.S., but
its taxable profits are low because the royalties or fees paid to the
first Irish company are deductible expenses. The remaining profits are
taxed at the Irish rate of 12.5%.


For companies whose ultimate ownership is located in the United
States, the payments between the two related Irish companies might be non-tax-deferrable and subject to current taxation as Subpart F income under the Internal Revenue Service's Controlled Foreign Corporation
regulations if the structure is not set up properly. This is avoided by
organizing the second Irish company as a fully owned subsidiary of the
first Irish company resident in the tax haven, and then making an entity classification election
for the second Irish company to be disregarded as a separate entity
from its owner, the first Irish company. The payments between the two
Irish companies are then ignored for U.S. tax purposes.[1] 


Dutch Sandwich


The addition of a Dutch Sandwich to the Double Irish scheme further
reduces tax liabilities. Ireland does not levy withholding tax on
certain receipts from European Union
member states. Revenues from income of sales of the products shipped by
the second Irish company are first booked by a shell company in the Netherlands,
taking advantage of generous tax laws there. Funds needed for
production cost incurred in Ireland are transferred there, the remaining
profits are transferred to the first Irish company in Bermuda. If the
two Irish holding companies are thought of as "bread" and the
Netherlands company as "cheese", this scheme referred to as the "Dutch
Sandwich".[3] The Irish authorities never see the full revenues and hence cannot tax them, even at the low Irish corporate tax rates. There are equivalent Luxembourgeois and Swiss sandwiches.

And so on: lots of ins, lots of outs, lots of what have yous - all quite technical, and best if left to your professional tax avoidance attorney. The end result is the following:

Or, in other words, profits increase, taxes stay flat or decline. Most importantly don't try this at home kids, because hefty jail time usually is usually imposed when an individual is caught engaging in comparable such tax "avoidance" schemes, or at least one is quite terrified to speak American (sic), and understandably so, in the middle of Zurich or Geneva. 

Yet for those who want to cut to the chase and visualize just what some of the crowning achievements of globalization are, the entire Apple tax scheme is summarized below:

The complete narrative can be found over at the NYT but the bottom line (net of no taxes of course, for cash flow purposes that is... GAAP taxes always gets the 35% treatment of course) is simple: companies can get away with paying negligible taxes if they so desire.

At the end of the day the question of corporate taxation is more philosophical than anything: by now everyone knows that America is becoming progressively more insolvent courtesy of exponentially rising spending and a tax revenue base that now funds less than half of all US spending, in the process forcing the Treasury to issue ever more debt, which in turn also makes Fed monetization of debt inevitable.

All of this is occurring at a time relentless populist class warmongering focusing on the individual income tax level, and just what according to one or two people in the administration is deemed a fair level of being "rich."

Which begs two questions:

  • Since the only reason for the myth of corporate taxation is to fund the retainers of international tax avoidance lawyers, why not just do away entirely with corporate tax, period. If the justification for such pervasive global schemes (whereby hundreds of companies use them), is that double taxation is ultimately senseless, that's fine, but then at least equalize the playing field, because while an Apple may be able to afford the complicated tax loopholes that allow it to pay 10% tax, there are thousands of Small and Medium businesses, those that do generate domestic jobs, which can't afford this, and are thus stuck paying 3-4 times more relative taxes compared to the Apples and the Googles of the world, generating far less jobs than if they could retain triple the cash they do currently.
  • Probably more importantly, if America truly does not care about the foregone hundreds of billions in taxes associated with such ubiquitous corporate tax loopholes, then let's just drop the entire farce that America desperately needs more tax inflows (apparently not if corporate taxes are being paid only by the biggest suckers) and while at it, let's just kill individual level taxation as well, so nobody has to pay any taxes. After all at this point what does it matter: if the Fed is indirectly monetizing half of US deficit funding, why not just go all the way, and at least avoid the hypocritical undercurrent prevalent within this and all other US administrations

Probably the biggest lesson for the day, which also should be known to all, is that it is the corporations that run the
, with governments and politicians merely placeholders to fool as many as possible
that the this thing called democracy exists, and that the voices of the people, or the only ones who pay taxes, are heard.

Finally this also means that the fundamental American creed can now be adjusted to better reflect the times to "No Representation without Double Irish with a Dutch Sandwich taxation."

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Archduke's picture

on a related note: aljazeera scoop on David Cameron's offshore connections:


Silver Bug's picture

People are avoiding taxes on a massive scale this year. Technically they are unconstitutional anyway.

vast-dom's picture

Yes. And i cited the NYTimes Apple article yeterday here......the us should do away with ALL taxes and CNTL+P their budgets while NOT meddling in markets -- which will free up the printing presses for said gov budgets which will in turn free up consumer spending which in turn will aide markets = so easy it's terrifying!

A Nanny Moose's picture

b-b-b-but all this chicanery creates jobs in unproductive bureaucracy, tax accountants, tax lawyers, paper mills, and information systems!!

/sarcasm -off


derek_vineyard's picture

aapl can't pay taxes....every cent of cash is needed to buy short dated US treasuries to store their cash hoard and assist the fed

lewy14's picture

The populist wing of the PTB have a solution: "tax harmonization" - global "governance" which arrogates the sovereign right to set tax rates. Presto, no more "havens". No more "sovereignty", either. Works for them.

What's worse: a world tax code, or letting the big corporations pay so little?

Marco's picture

A world tax code ...

There is nothing wrong with corporations paying little, as long as they reinvest in the company I don't see why any taxes should be payed. Tax the people getting wealthy off the corporation, not the corporation itself.

cossack55's picture

But....but SCOTUS says coroporations are people too.  Can we throw Apple in debtors prison?

LasVegasDave's picture

Tax avoidance is patriotic and everyone's right under the Constitution

The only thing inequitable is that individuals arent able to take advantage of double Irish on their personal income taxes

Charles Wilson's picture

No, no, no, no.....

First, a "World Tax Code" would open with an "Introductory Tax Rate".  Do you honestly think it would stay there?

If you wouldn't like this WTC, where would you move? Oh, wait a minute! Who said anything about being free to move in this Brave New World?


How you learned nothing these last few years? NOTHING?


Finally: Though Milton Friedman has been criticized greatly on this site recently (Unfairly!), it was Friedman who gave the prescription for the growth of the giant, Mega-Corporation.  He was highly critical of laws that reduced Corporate Tax Rates for taking money that would have gone to shareholders and reinvesting that money into the production.

You couldn't set up Crony Capitalism any better than to take money from shareholders and make the political decisions as to where to invest - for Tax purposes!





Marco's picture

A little careful reading saves a lot of typing ... he asked what was worse, I said "World tax code".

As for promoting reinvestment over dividend payments, I see nothing wrong with that as long as the reinvestment is domestic (I never said anything about leaving capital flows to other countries unregulated/untaxed, but countries can handle that themselves without any global organization if they have the balls to say no to globalization). In the end if the shareholders want higher dividend they can demand it at the shareholders meeting ... as long as capital gains are taxed equally as dividends there is no real reason for them to go for reinvestment unless it's for the good of the company.

Dividend payments don't prevent the rise of the mega corporations, good and well enforced anti trust laws do that.

Charles Wilson's picture

OK on WTC.

Point about Friedman and the rise of Mega Corporations is still very valid.



dick cheneys ghost's picture

Apple is a Chinese company........why should they pay taxes in America?

A Nanny Moose's picture

Corporations do not pay taxes. They collect them.

zhandax's picture

Monopolistic corporations do not pay taxes.  Their smaller brethren most assuredly do.  That is among the reasons the Sherman Anti-Trust Act was originally passed and why it should be dusted off and wielded like a fire axe today to dismember these unconscionable abuses of resources and power.  Small business creates most of the jobs and they do pay taxes.  Why, then, do we allow these behemoths to buy our government, outsource our jobs, and write themselves a free ride?  Turn them into a lot of small businesses and throw the buzzards who assembled them in jail.  It's not like more than a handful attained the critical mass organically; other that Wal-Mart, name another who did not attain that size by M&A?  Either M&A should be illegal once a business hits a certain percentage of GDP, or their tax rate goes to a flat 90% once they pass that threshold.  I realize the obstacles to achieving this end in the current political environment, but why is this not even a topic of discussion?

A Nanny Moose's picture

As legal fictions, no corporation pays taxes. Costs associated with taxation are passed along to people in the form of a) higher prices, b) fewer jobs.

Wake me up when you are ready to apply the Sherman Act to the biggest fucking monopoly of them all. The monopoly with all the guns. The monopoly that grants all other corporate monopolies. The monopoly whose solution to TBTF was TBTFer. The monopoly that destroys the currency that results in unabated resource consumption. Yes....Government.

Small businesses use the same tax code to move profits around and avoid taxes that the big businesses use. Do bigger businesses get bigger favors? Sure. But stop fooling yourself into thinking that a corporation is not a corporation just because it is only 50 employees and pulls in $10 million/yr.

Failure is the best regulation




zhandax's picture

I agree with your intermediate point "Failure is the best regulation" and suspect your big picture point is along the lines of 'resistance is futile' and I would be hard pressed to argue.  However, you missed my overall point, and I would argue, that that there should be discussion of dismembering these monopolies and I don't hear that anywhere.  I would at least expect a modicum here on the hedge.

Henry Chinaski's picture

Apple is despicable on so many levels.  I am outraged and disgusted.


sent from my iPad

fiddy pence haff pound's picture

I hope Apple's fall from grace , in your eyes, didn't come after you agreed to make

a pilgrimage to the Apple store for the death of the Great Employment Exporter, Mr No Jobs.

Frankie Carbone's picture

"Apple is despicable on so many levels.  I am outraged and disgusted.


sent from my iPad"


How richly ironic. LOL

fiddy pence haff pound's picture

I know it's ironic. It's also a little stale around here.

That joke went out of style the week after Jobs died.


It might work at the watercooler, at your job.

So, I just added my own lame comment.


I'm working on my material. so sue me.


just joking. we're cool

gastrolith's picture

In stories like this it's usually worth mentioning that govt tax revenues have been pretty steady at abou 17% of GDP for decades. It is spending that's the problem, having blown out to 25% from an average of 18%.

As for Apple and tax avoidance, who is going to spend that $2.4 bln more productivity? The govt?

Bob Sacamano's picture

Agreed.  So we want the government to get more money so they can spend it making more dependent on government?  That is the agenda of many. 

Reminder:  only individuals pay taxes.  Corporations collect and remit them on behalf of their customers and shareholders (all of them individuals). 

Beam Me Up Scotty's picture

"It is spending that's the problem, having blown out to 25% from an average of 18%."

This is exactly the problem with raising taxes.  We could raise taxes by 1.4 Trillion or whatever the current deficit is and be in balance.  The problem is, the government would take the bulk of that money and spend it, say 1.2 trillion and say they reduced the deficit by 200 billion.  The desire to spend is NEVER satiated.

A Nanny Moose's picture

Exactly. This is always the case when spending Other Peoples' Money under the premise that this money can be used for good.

Giving these theives yet more taxpayer money will not do a damned bit of good.


Poetic injustice's picture

Reminds me of Simpsons.

Where Mr.Burns was outraged that his corporation paid 3 dollars in taxes last year and made another scheme to avoid paying that kind of money.

fiddy pence haff pound's picture

On the one hand, you gotta respect their fight. In big businesses the culture seems to be

screw-or-be-screwed. So, if the government offers itself for a screwing, the public

gets screwed out of tax.

The self-made Atlases out there don't believe that the public sphere is worth anything,

and in many countries they got people believing that the social safety net is not

in the interest of the increasingly-working-poor.


the banks won't stop until the government regularly gives them money, which is

negative taxation. Oh, sorry, I've been told that this is presently going on.

zippy_uk's picture

Bin all "business taxes" and replace with a) Taxes on resources - stops "throw away economy" which is long term bad c) Charge instead a "market access fee" for domestic market, applied to foriegn and domestic supplies the same based as a percentage of sales - no deductions. Because it would go on everything, probably a low rate like 5-10% would be enough.

If you export - no tax to pay (unless you import components). If you import - you help fund the country. Would apply to services also such as offshoring so will help western countries compete again.

No exceptions, No clauses, no favours, no lawers or accountants - so should help mallet a few parasites on the way also.

Catullus's picture

So we've shown that the largest company in world got that way because they have no debt and they find ways to mitigate their tax liability.  They create continously improving products and services that millions of people the world over depend on.  Generate billions in cash flow every month.  Put pressure on suppliers to improve the quality of life of their workers.  And return cash to their investors in the form of dividends...  This seems like the formula for a great company: Low debt, low taxes, continuous reinvestment to improve the product.

WTFx10's picture

They create continously improving products and services that millions of people the world over depend on?

imillions of people depend on streaming ,movies,instantmessaging, and googling? iWould hate to have to "depend" on a proprietary monopolistic company for my entertainment. Sort of like Depending on the monoplolistic Jewish Organized Crime Syndicate World Banking Cartel to control the world monatary supply. The whole FUCKIN planet depends on it but who benefits? The Cartel or whatever you want to call this global CON job DEPENDS on us. They get just what they want don't they?

duo's picture

Agreed.  I've lived my whole life without using an Apple product, so I don't see how shitty life would be if Apple didn't exist.

Catullus's picture

The whole FUCKIN planet depends on it but who benefits?

Maybe you should trying convincing "the whole FUCKIN planet" not to use their stuff. I don't see "The Cartel" holding a gun to anyone's head forcing people to use Apple products.

I do see the US military forcing people to use dollars in exchange. 

A Nanny Moose's picture

Streaming vids of the latest trainwreck of a celeb is the only use for such devices. In the real world, where shit is produced, we in IT are working to inrease productivity (read decrease the price of your iShit) by fostering an environment whereby users can securely access business applications from mobile devices.

Email is the obvious app. Tablets, are also being use by operators in industrial control environments to monitor data points, in real-time, across infrastructure that can span 20 or 30 miles. Checking such datapoints previously involved calling an operator at the main office (who was tied to the desk at the main office). Same function but the labor and ETC involved were all cut by 1/2 at least. Also reduced was capital investment in remote, proprietary equipment.

I was in a coffee shop in tiny little Idyllwild, CA. They used an iPad with Square as cash register and CC processor. My receipt was an email rather than paper. Law offices are deploying iPads for lawyers to review case files while working from the courts. In construction iPads are being used review blueprints while on site. Changes can be distributed in minutes rather than days or hours. Materials could be ordered while onsite.

It's not just a toy anymore.

GMadScientist's picture

"because they have no debt and they find ways to mitigate their tax liability. "

How much was the former and how much the latter? Should that be "find" or "invest in the election of those prone to creation of"?

"Put pressure on suppliers to improve the quality of life of their workers"

Hahahaha. Foxconn loves shitheads like you. So does the Chinese landscape!

And an iShit would cost how much more if they manufactured enough of them in the US to prevent the inevitable lines outside the Apple store at each launch?

(hint: significantly less than $100B motherfucking dollars)

Catullus's picture

You add nothing to this discussion.  You're just a pissed off socialist twerp that choked down on the "corporations are ruining everything" dick and now view the world through your warped sense of self-righteous indignation.  Your posts of flaming piles of dogshit.  There's rarely even a point to retort -- just a mishmash of incoherent ramblings that no sane person would respond to.

GMadScientist's picture

Wah. Get someone else to change your diaper.

Thanks for the response!

fiddy pence haff pound's picture

The legal avoidance of tax is just about the biggest scam of all, because it's not just

banks doing it. If retailers are doing it, then there's a giant sucking sound in every

country as the wealth of the nation leaves, never to come back.

It's like what Western countries have been doing to poor countries for centuries. Chickens

have come home to roost, now that globalisation means free flow (out) of capital.


It's another reason why I try to keep my money out of the hands of off-shoring companies, but

it's difficult.

Read "Treasure Islands" by Nick Shaxson. Join an UNCUT movement.

The bastards should be taxed fully, at source. Company sells something, they pay coroporation tax

right from the start and they can f^&*king-well employ a team of accountants to get it back, and they'll

get tied up in red tape.

If that's not done, we're going back to feudal economics. University courses will be studying

SUPPLY & DEMAND curves with problems like

"how many chickens, oxen and bushels of wheat should a serf pay before the Lord of the manor 

stops threatening to use him for target practice". Matched mating pairs will also have to stump up

a certain number of male children for purposes of warfare. But, if one of them is charming, he could

marry a princess, which means the whole family will  get to bathe.

LasVegasDave's picture

Try wrapping your mind around the concept that taxation is theft and you might think of it differently

fiddy pence haff pound's picture

I know that taxation is usually never enough to pay for the loans that governments take out.

But, I don't see how anything communal will work without tax of some sort.

What's your answer to funding education?



BooMushroom's picture

Power is evil. Got it. Consider the following:
Company A mines ore, sells them to B, pays its employees, who pay income tax.
Company B buys ore from A, refines them into industrial metals, sells metals to C, pays its employees, who pay income tax.
C buys metals, turns them into machined parts, sells parts to D, pays its employees, who pay income tax.
D buys parts, turns them into finished products, sells them to E, pays its employees, who pay income tax.
E puts finished products on the market, sells them to john Q public, pays its employees, who pay income tax.
Q pays E for finished products, pays sales tax.

Who in this equation paid no tax?

Frankie Carbone's picture

Corporate tax lawyers should all be thrown into a wood chipper, feet first. 

They rank up there with marketers, politicians, and professional, career activists as among the worst of Satan's minions walking the Earth. 

Catullus's picture

Disagree 100%.  Corporate tax lawyers are heroes BECAUSE they find ways to give less money to politicians. That's fewer resources the government can squander, more resources retained by private society

GMadScientist's picture

Or....they're a closely guarded cabal that charges hundreds of dollars per hour, can decide who is legally allowed to enter their club, insures that politicians that will keep them in business until their grandkids get through Harvard are elected, and then take the credit for "saving you from taxes".

If corporate tax attorneys weren't making sure that dipshits like Mittens could keep all their ill-gotten gains by rigging the tax code in favor of the chosen few, small businesses wouldn't have to fork over the difference just because they can't afford a slopjockey man of their own in DC.

You're like an ignorant shop owner who thinks the Tony shaking him down is a really great deal for "protection". Stop licking boots and wake the fuck up while you can, simp!

Bob Sacamano's picture

"rigging the tax code in favor of the chosen few"

The ONLY people doing the rigging are politicians - the only ones who can pass the laws.  If they are being corrupted, who's fault is that?  Only politicians.  They can't withstand the forces to rig the rules?  Bull.  They choose to do what they do.

insanelysane's picture

This is so right.  The government chooses who to villify and who to prosecute.  There is no equal protection under the law.  Big politics has these 2 phony groups, Republicans and Democrats, just like the fake wrestling companies have "good guys" and "bad guys".  You can't have one without the other because who would donate.  So you have people, who think they are intellectual, siding with one party or the other and defending whatever they are doing, and none of what they are doing makes sense.  For instance:

We can't have voter id cards because obtaining a voter id card is costly and a burden to poor citizens.  Ok I could agree with that.  EXCEPT WE HAVE A LAW WHICH FORCES EVERY CITIZEN TO BUY HEALTH INSURANCE.  Pay for yearly health insurance, not costly, but getting a voter id card is costly?  And when you get insurance doesn't someone give you an insurance id card so the act of buying health insurance includes the activity of getting an id card whereas getting a voter id card is the entire activity for getting a voter id card.

We need true representation without party affiliation.  Ban BIG POLITICS.  Term limits won't do it because BIG POLITICS has an assembly line of "qualified" toadies.

Catullus's picture

Were you born completely full of shit or did you have to work on it for several decades??

Corporate tax attorneys in DC?  That's interesting.  I guess all of those tax attorneys and tax accountants working in all those accounting departments are just apart of that cabal of elitists protecting ill-gotten gain.  Hold on.  Let me email Peggy in accounting and admonish her for being an elitist.  "God, Peggy, you're such a smelly cunt.  I should have known your tax law degree from Whatever State University was really code for membership in the Cabal.  I've woken up.  I will no longer being a simp to your constant demands to fill out these Purchase Orders!" 

Frankie Carbone's picture

Strict Accountability. 

Sorry, "I was just doing my job" doesn't cut it. 

cossack55's picture

The fact is that there are just no good guys in this whole rotten story.

Frankie Carbone's picture

Which of course forces the government to live within its means, thus forcing it to reduce spending. 

Yeah, thank God for corporate tax lawyers. 

From the junkings, it looks like there are at least 5 of them perusing the comment section. 

Sorry, all of you gotta go into the wood chipper. It's the right thing to do.