Presentation about the Dutch sandwich or the double Irish.

The Dutch sandwich and the double Irish are exactly the same thing. They are a method of avoiding payments.

The method was invented in the early 80’s by Apple. Steve Jobs and his lawyers found a loophole in the Irish tax system. The loophole is that in other countries are taxed in the country where the company is situated. Thus an American company has to pay taxes in the US and a Dutch company has to pay taxes in The Netherlands. However, the Irish law dictates that taxes are taxed in the country where the management is situated. The management is not necessarily situated in the country it operates or where the country is situated.

Then there is the Dutch loophole. The Dutch law states that when a subsidiary is active in another country it does not pay taxes over that amount in the Netherlands.

Because these laws have loopholes, the law itself is not broken and thus this is perfectly legal to do.

So how does it actually work? For example you buy an advertisement with google in the US for $1000. $100 stays in the US to cover costs that the company makes for the ad. 900 Euro goes to Ireland. This money is used to make and sell the add. After the costs made in Ireland headquarters, 800 gross profit goes to a second entity in Ireland where the of Google is located. They then send the money to the Dutch whose law dictates that the money goes back to the first Irish company. Because the first Irish company is legally managed from (where the is 0%) the tax rules of that country count. Thus in the end Google does not pay any taxes whatsoever.

Not only are the people of Apple the inventors of this taxation practice, they are also innovators. So they have simplified the process. So now it says to the Irish government that it should pay taxes in the Netherlands. In all other countries Apple is located it says that it should pay its corporate taxes in Ireland. Thus effectively it has no location to pay its corporate taxes and thus it doesn’t pay any.

The result is that Apple pays almost no taxes over its overseas profits. And since it has almost no profits in the US it means that Apple barely pays any taxes. One noticeable difference is with China where Apple is obliged to pay the local taxes. Therefore the total corporate taxes are not completely 0.

Another result is that other companies have copied the approach. Thus people with Android or Windows phones are not better than the Iphone users because Microsoft and Google have more or less the same system. In fact, almost all large international companies use this method to avoid paying taxes. And off course this is costing governments all over the world money.

There are also a few disadvantages. For companies it is difficult to get the money back to the US because they would have to pay the taxes anyway. The profits can thus only be used outside of their main country. This is the reason that Apple has over 50 billion dollar on its accounts but had to borrow money to pay its dividends to its investors. And this is getting them a lot of bad press as well.

The problem for countries is that they are missing out on tax income. This problem has been acknowledged but it is difficult to do something about it. The problem is that the law cannot be easily changed and even more difficult is to change free agreements or the Schengen agreement.