The “double Irish with a Dutch sandwich” might sound like a delicious option at that trendy pub down the road — but it is actually an even more appetizing tax avoidance scheme that has been practiced by many multinational companies for decades. Apple Inc. is one of the more notable examples of said companies. In simplest terms, the aggressive tax planning strategy involves two Irish companies to receive sales royalties — one in North America and one in the EU. Both Irish companies funnel their royalties to an offshore company acting essentially as a tax haven, with the Irish EU company using a Dutch company as an intermediary. Due to national and regional tax loopholes, this strategy greatly reduces the tax burden incurred by participating multinationals, according to Investopedia.
When it comes to EU taxes, however, Apple might have to find a new favorite dish. The EU is cracking down on these loopholes, with some lawmakers proposing even tougher rules. According to appleinsider, things are getting more tense.
“[German] Finance minister Olaf Scholz insists there needs to be a ‘worldwide minimum tax level that no state may go below,’ in relation to corporation tax. The lofty goal, which would require an agreement by practically all countries if it were ever put into practice, would ensure companies would pay governments a considerable amount of tax, regardless of any financial trickery the firms perform to minimize their tax outlay. Failing to comply with the proposal would be met by tougher measures than are currently available for regulators.”
Though the finance minister specifically called out a worldwide minimum, it is unclear if he was considering the world beyond the EU. This has been a problem in Europe for some time. Large U.S. companies are always looking for favorable tax situations — even when deciding locally on matters such as new locations and facilities. Typically this aversion to cost does not change when said companies conduct business abroad.
Ireland has benefited from the behavior of many of these multinational companies, disproportionate to their nation’s size and contribution to the company’s bottom line. That is because Ireland has a much lower — and thus much more favorable — tax rate. Many in the EU see it is an unfair advantage, and they seek to level the playing field.
It is important to note that Apple is not the only company being targeted. In the past, there have been plenty of the double Irish and Dutch sandwich dish served to dozens of the world’s major corporations — Google and Microsoft among them, as Investopedia notes.
It is also important to note that none of the companies, including Apple, have been accused of doing anything illegal. All probes have indicated that they have been fully compliant with all tax laws, including those in the EU.
TechCrunch reported a month ago that Apple has completed payment of a $15 billion European fine due to a retroactive rule change in the tax laws. It is possible that a minimum corporate tax could clarify the situation for multinational companies going forward.