Practicing law in today’s world, particularly in the areas of corporate and tax (no disrespect to my litigation partners), involves the constant development, refinement and deployment of effective strategies to address the mountain of old regulations and the barrage of new ones created by Congress, the White House, and every state legislature in the United States.
To help corporate clients understand and deal with the implications of these regulations, corporate tax attorneys must stay ahead of the curve. This pressure reminds me a bit of the scene out of the original Indiana Jones, Raiders of the Lost Ark movie, where after Indiana Jones retrieves his prize, he is faced with the prospect of being crushed by a huge boulder that is quickly bearing down on him. At that point, he has two options—either run fast or be crushed. Likewise, the currents of fast moving laws and regulations will crush any corporate tax attorney (and their client) if she or he is not out front.
With all of this pressure as a practicing corporate tax attorney, I like to take a big trip every other summer to get away from the law and to reboot my mind. Last summer, it was to the United Kingdom--London, Scotland and Ireland. The biggest reason for our two (2) day Ireland diversion was to visit the “Egan Homestead.” Of my many different family lines, the Egan line came from Tullamore, Ireland. Other than Ireland being green, my only other impression of Ireland was its lack of economic vitality, which may have come from the fact that the Egan Clan left Ireland because of its poverty.
We landed in Dublin on a Sunday and my first impressions were totally different from my pre-conceived notions. Looking around, there was ample evidence of prosperity—the international airport was recently rebuilt to world-class standards, the highways were new, and downtown Dublin was lively. We even ate lunch in a posh neighborhood where Bono lives and eats. We then rented a car and set off for a quick church experience (my wife loves attending church around the world and then visiting with the church-goers). On the way to church, I noticed several buildings with American logos affixed, like eBay and Google—very curious. I began surfing the web on Ireland and found out that a number of large American companies use Ireland as their corporate headquarters, including, Google, Facebook, PayPal, Microsoft, Yahoo and eBay—very surprising.
I also met several well-educated and wealthy American executives at church that had moved their families to Ireland. Why was this so, I kept wondering? One Harvard graduate investor explained that the corporate tax laws were so favorable in Ireland that it made no sense for corporations to stay in America. Among other things, he explained, the “Double Irish Sandwich” technique had been developed by large American accounting firms to reduce tax liability of some American corporations headquartered abroad to “un-American” levels. I further researched this technique and was interested to learn how it involves several countries in its implementation, including Ireland, the Netherlands, Bermuda, and/or the Caymans (see links below for more detail). This structure has resulted in American corporations keeping their money abroad, and their American tax obligations down. Although complicated, this technique has thus far proved to be effective by saving American corporations abroad billions of dollars in taxes.
As you can imagine, the U.S. government is less than thrilled about losing billions of dollars in tax revenue to foreign countries. As evidence of this concern, the “Double Irish Sandwich” has become a hot political topic for politicians in Congress and the White House. Several congressional hearings have put Wall Street executives and Apple executives on the spot to answer questions about their surgical deployment of this technique. One of the main arguments against the technique, other than a loss of tax revenue, is whether it is fair that large, multinational corporations (think Apple) pay less marginal tax than small main street businesses (think Joe’s Supermarket). Fair Point?
In contrast, Ireland has greatly benefitted from these aforementioned tax strategies with the influx of American companies. Even Bono, lead singer of U2, who typically lines up with liberal policies, has embraced Ireland’s low corporate tax rate. He says that Ireland’s corporate tax policies have “brought our country the only prosperity we’ve known.”
If this inverse tax policy relationship continues between the two countries, without any tax policy adjustments from our country, Guinness might become the most popular lunch beverage in the U.S.
Based on this short summary, does the use of this elaborate technique sound fair to you, or, is this akin to egregious corporate tax evasion by Wall Street corporations?
If you are interested in learning more, please review the articles linked below.
For more information, or to seek assistance with tax planning or other corporate strategies, please contact Derek E. Anderson