If you’ve been following the news from Ireland and Brussels these past 24 hours, you may have been flummoxed by certain financial terms used by some of our weaselly politicians* and economics correspondents. Here goes…
In tax avoidance parlance, tax avoidance is never tax evasion. And in tax avoidance, a “Double Irish” involves shifting income from a high-tax jurisdiction to a low-tax jurisdiction using things called “ghost companies”.
Picture the scene: one “Irish” company sits offshore sunning itself in, say, Panama or Luxembourg or – no, this company has always fancied the Cayman Islands. Meanwhile another company strolls up and down along the quays in Dublin’s regenerated docklands as an Irish tax resident.
Then the Caymans arm licenses rights to the Dublin arm for substantial royalties. Maybe this licensing involves something called IP, or intellectual property. The Dublin arm’s taxable profits are incredibly low because the huge royalties have become “deductible expenses”.
In addition, both arms have their hands on something called a “Dutch Sandwich”. Have I lost you yet?
This apparently entails another shell company, this time wearing clogs and clomping around Rotterdam outside an “office” that is little more than a brass plate and a postbox. It clocks up revenues from sales of stuff shipped by the Dublin arm, but the funds for the production costs incurred in Ireland get transferred to the Rotterdam arm.
It in turn transfers the remaining profits to an even tinier “office”, in Bermuda this time, with its zero rate of corporation tax.
Hence the “sandwich”, with the two Irish arms as the bread, the Rotterdam arm as the ham and cheese, the Bermuda arm as…
Please excuse any slips I’ve made in in the above attempt to grasp what’s going on. Sometimes it feels as though ordinary people are being deliberately misled. Perhaps that’s the whole point: we’re not supposed to understand.
The whole gist of this labyrinth of secrecies and subterfuges and smoke and mirrors is that we are supposed to “Move on, there’s nothing to see here.” Or if there is, everything is perfectly legal, proper and morally right and can’t be any other way. Or so we’re told by all the powers that be.
“Technically speaking”, the Irish tax officials can’t see the full revenues so they can’t tax them, even at Ireland’s notoriously low corporate tax rates. No ham, no cheese, all that’s left on paper are a few measly crumbs.
For more on these slippery shenanigans by multinational corporations and accountants and lawyers and conniving politicians, try googling “double irish” +“dutch sandwich”, or “ireland” +“offshore tart”, or “bono” +”tax”, or “Apple are basically a small country now”.
And as for the European Commission’s specific charges yesterday about the Irish State’s illegal preferential tax treatment of Apple, they’ve provided a very clear and simple infographic that even I can grasp:
(* Maybe “weaselly” is unfair to weasels. Perhaps I should have said “spineless” but that’s far too generous).