New Laws Meant to Close Down Tax Havens and Shut Loopholes Could Have the Opposite Effect – By Erik Sherman (Fortune) / Jan 8 2020
Thanks to a change in Irish law, Google in the U.S. will do something it hasn’t in years: own outright its intellectual property, including patents, trademarks, branding, and more.
For years, Google and other companies employed a legal tax avoidance strategy called the Double Irish, Dutch sandwich. Here’s how it works: Using complex multi-national structures, they transferred ownership of intellectual property to wholly owned subsidiaries in low- or no-tax regions and then licensed the material back to the rest of the company. Profits turned into “license fees” and thus avoided taxes.
One of the Irish laws that made the tactic possible expired on Jan. 1, 2020 due to international pressure from many countries—the U.S., France, the U.K., and Spain, for example—that were tired of losing tax revenue to low-tax Ireland, among other havens.
Some of the pressure came through political organizations as well like the EU and Organisation for Economic Co-operation and Development (OECD). Other efforts have been unilateral.
France went the furthest, introducing a digital tax last year, a “stick” that targeted the likes of Google parent Alphabet, Facebook, and Uber to pay up. On the “carrot side” side of things, Congress in the U.S. used the 2017 tax overhaul to create incentives for companies to repatriate overseas profits and expand U.S. operations, including job creation and investment in equipment and facilities.
However, corporate ingenuity and the law of unintended consequences blunted—sometimes completely—many of these attempts.
Continue to article: https://fortune.com/2020/01/08/corporate-tax-haven-laws-loopholes/
