The Double Irish Dutch Sandwich: End of a Tax Evasion Strategy

> I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way.

It doesn't. Once you've renounced your US citizenship you're on exactly the same footing as any other foreigner in terms of visiting or living here.

And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E).

> If you don't want to pay those taxes, then renounce your US citizenship once you have

Haven't you heard of exit tax? If you renounce citizenship (or surrender your 8+ year green card), you must pay 30% of your worldwide assets' value (as if you sold it for cash) to the IRS. And if you own something illiquid, you're deep in trouble!

So no, people can't renounce their U.S. citizenship easily, the IRS has accounted for that...

> probably in Hebrew, written up in Aramaic or Greek

It is generally agreed upon by scholars that Jesus’ primary language, like in Palestine generally, was Aramaic, not Hebrew, which was already well on its way to becoming a liturgical language (although Jesus probably knew Hebrew well, as he was called “rabbi”, and likely Greek as well): https://en.m.wikipedia.org/wiki/Language_of_Jesus. Certainly for the context of this quote, it’s likely that he was speaking in Aramaic, given that in the chapter he was responding to questions from a variety of local people.

> If you don't want to pay those taxes, then renounce your US citizenship once you have, say, gained UK citizenship, if that works for you.

Boris Johnson - the ex UK prime minister - was born in the US, and complained loudly and frequently about having to pay taxes to the US - and appears to have refused to do so atleast partially. Having to pay tax on profits from the sale of his family home (which is tax free in UK) was the trigger to get him to renounce citizenship.

https://www.forbes.com/sites/robertwood/2022/07/10/boris-joh...

> The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US

No, I think you're missing the issue.

Suppose the company (let's call it XYZ Ltd) is owned 100% by my spouse. Let's say XYZ has $XYZPROFIT in one year. It then pays $XYZUKTAX on that profit, but the US isn't involved whatsoever. If it pays me $MYSALARY, XYZ reports that to the UK government and pays $MYUKTAX. I then report the US government $MYSALARY and $MYUKTAX, calculate $MYINCOME, and then calculate $MYUSTAX (which is normally $0, since UK taxes are higher than US taxes).

Now let's suppose I own more than 10% but less than 50%. Now I basically have to report to the US the same information about XYZ's financials that the company reports to the UK government, as well as answer 40-60 questions each of which would take a few days to understand the meaning of. Thankfully that's where it ends under normal circumstances; pay an accountant to prove you're not cheating the system and you're done.

Now suppose XYZ is 100% owned by me. It has $XYZPROFIT for the year, and pays $XYZUKTAX on that profit. Now, by default, $XYZPROFIT is included in $MYINCOME, but $XYZUKTAX is not included in $MYUKTAX; meaning by default I'm going to be double-taxed. I can avoid this, but only with 1) extra paperwork, and 2) forgoing any tax breaks for start-ups that the UK government has.

> "Pay unto Caesar, that which is due to Caesar and pay unto God that which is due to God" or words to that effect.

As I said, I don't mind paying taxes, but I don't want to pay it twice.

If you renounce your citizenship to avoid taxes, you are barred from ever entering the US or its territories again. Take one quick look at the EEZ of the US and tell me if you are OK with never traveling through those places again.

> The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US - that's a condition of US citizenship.

imo a feature, not a bug.

You seem to think that the IRS doing that just for a laugh, or just because they hate rich people, and that Big Tech companies are the only ones playing shell games with their revenue in order to shirk paying their fair share to support the society they've benefitted from.

I think it much more likely that rich people also play shell games with their assets / revenue to avoid paying their fair share to support the society they've benefitted from, and that the IRS requires the extra reporting to try to counteract that.

This article is specifically about a specific loophole invented by unethical accountants and lawyers, but it's also generally about all the effort spent by unethical accountants and lawyers to come up with such loopholes, causing not only harm to society (in the form of free-riding on those who are paying taxes), but which in turn forces effort on the part of tax agencies and legislatures, which then forces effort on normal people like me who just want to make some money and pay our fair share. It's pure wasted energy.

> What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR)

A big problem is the US is one of the few countries in the world which taxes its citizens (and green card holders) worldwide, for life, no matter how long they’ve been outside the United States. Most countries don’t tax non-resident citizens, or only do so for a limited period of a few years.

The only other country that does it, that I know of, is Eritrea - and it has been widely condemned by the international community for its “diaspora tax”. But no condemnation for the US diaspora tax, despite actually being far more onerous than Eritrea’s is

I believe they may have been referring to the Global Intangible Low-Taxed Income (GILTI) tax, which from what I've read is as bad as the OP describes in their post.

https://www.investopedia.com/global-intangible-low-taxed-inc...

Bro what. It's very clearly meant to cover up a swear word.

How many computer programmers moonlight as tax avoidance accountants?

Wow. I can't believe people believe this is still true in 2024.

I worked in crypto sector which paid really well in some cases... Though compensation had little to do with talent and more to do with focus on political bs and alignment with the needs of corrupt authorities. Some could argue there was an inverse correlation between talent and compensation as the most corrupt people are often that way because they lack talent to begin with.

I've observed similar dynamics in big tech corporations, unfortunately. People are promoted on the basis of their incompetence and capacity for self-delusion as it creates the necessary blind-spots which allow organizations to occasionally poke their toes beyond red lines to reap massive profits.

Stupidity and incompetence are useful attributes within corporations because they instill a feeling of insecurity in the minds of the affected employees and this makes them highly loyal and controllable. Sometimes I think one of the main reasons these companies hire actual intelligent people is to make the incompetent people feel insecure 'imposter syndrome' and increase their degree of loyalty/compliance. They don't actually need intelligent people to run things because they have monopolies and the big profits are to be reaped in maintaining their monopolies which is achieved via dirty politics; not achieved via innovation.

I think many intelligent people have observed this reality in companies they worked for. We've seen the HR manager who will bend over backwards to deny reality to align with the goals of management.

"Tax avoidance and evasion are not ..."

Those are formally defined terms here in the UK [citation needed - must find one].

Tax avoidance is avoiding paying a tax by following some legally sanctioned rules. For example, in the UK, using an ISA, which is a form of bank savings account, for which the interest is paid tax free. ISAs were created by an Act of Parliament. By saving in an ISA you avoid paying some tax.

Tax evasion is avoiding paying tax ... by not paying tax that is due, according to the law of the land.

There are no grey areas these days. When you do "Self Assessment" in the UK, one of the early questions paraphrases to "have you done anything dodgy". I think it is something like: "Have you participated in any tax evasion schemes within the tax year considered here". Without looking it up now (which takes a while), it may even use the word avoidance instead of evasion.

Self assessment is similar to how the US and some other countries do taxation.

In the UK the norm is Pay As You Earn (PAYE). Your employer does everything - you earn a wage and tax (Income Tax and National Insurance) is extracted at source and the balance is paid to you. The taxes are passed on to His Majesty's Customs and Revenue (HMRC). You can fill in a Form P11D if you want to claim expenses for something you supplied or pay for benefits received from your employment. Most employees in the UK don't care about taxation too much - it just happens.

Tax avoidance and evasion are very different beasts. Do be careful.

For tax strategies that hadn't been ruled on by court, and are ambigious based on the law as written, are they tax avoidance, evasion, or are they just untested tax strategies?

> It's more complicated because the Irish law people were following was found to be invalid,

It wasn’t found to be invalid per se. The European Court of Justice found that the tax breaks Ireland was offering were unlawful state aid (a corporate subsidy that violates EU law) in the case of large multinationals such as Apple. From what I understand of the ruling, it only applies to large multinationals, and Ireland is allowed to continue to offer the same tax breaks to smaller firms.

https://curia.europa.eu/jcms/upload/docs/application/pdf/202...

Also, while IANAL, I have read some EU law textbooks, and one thing they make clear is that ECJ decisions do not always have “direct effect” - the ECJ can declare a national law to be in violation of EU law, but whether that by itself invalidates the national law depends on the specific grounds the ECJ used. So, without having looked into the legal details of this specific ruling, I’m not even sure if it makes the Irish law invalid, as opposed to merely illegal. The distinction is, an illegal law, the national government is obliged to repeal/amend it, and if they fail the EU can punish them, but it remains in force until they repeal/amend it; whereas an invalid law they have to immediately stop enforcing it.

This case was about Apple in particular and it is very important to understand that this has never at any point been the law in Ireland as it was understood at the time.

Apple was treated differently to all other companies -- those companies were subject to the laws at the time which allowed multijurisdictional shenanigans as described in the OP link. There was never any legal basis for Revenue's different level of enforcement for Apple alone.

> Is that fair to say given that it's been found illegal?

Those activities were not illegal at the time. If the laws have changed, then as a tax paying entity, these people/businesses will have to comply with the new laws and/or remove themselves from the jurisdiction where these laws preside.

Well, if I eat a steak this year and eating animals is made illegal next year, was it legitimate that I ate a steak this year?

Tax avoidance and tax evasion are defined terms and the distinction between them is that the first one is the set of things that are legal. Some of these are obviously legal, like buying an electric car so you can get a tax credit you're eligible for if you buy an electric car. But companies will try to find and use all of these, including the ones that go right up to the line of what's allowed.

The actual problem is that tax codes are complicated enough to allow this game to be played. You want to try to assign the profits of a multinational supply chain to a particular jurisdiction and then end up surprised it ends up somewhere with low taxes? The premise is wrong. All of the revenue is somebody's profit/income. Just tax revenue where the final product is sold, allow deductions for cost of goods sold when the tax on that portion has already been collected by the supplier and stop having any other taxes that give the accountants complicated rules to game.

There is a clear legal distinction in fact between tax evasion and tax avoidance. Tax evasion is illegal. Tax avoidance is not. Tax evasion means you are doing something illegal to not pay taxes, taxes that you would otherwise owe for example if the government had total knowledge of your financial records. Tax avoidance means you are staying within the letter of the law and that your actions taken in the process of doing everything you can to limit the taxes you owe are legal actions.

It's quite simply the difference between taking legal and illegal action. And if the IRS were to be fully aware of what you've done, whether you have broken the law or not. With tax avoidance you do everything you can to not actually break the law (you want to take max advantage without crossing the line). With tax evasion you are breaking the law.

The IRS will almost always try to nail you for tax evasion if they find out what you're doing. The IRS will rarely be able to get you for something related to tax avoidance if you're very careful / strict about it and stay within the letter of the law. Obviously this applies in the US context, however I find that very commonly when people discuss tax evasion vs tax avoidance, they're talking about the premise I'm talking about: one is about taking illegal actions, one is legal and narrowly walks the letter of the law to limit taxes.

> Did you know UK tax law makes every scheme whose primary purpose is tax avoidance tax evasion?

This is the kind of law politicians pass thinking they're being clever when they're really just being incoherent.

If the government makes renewable energy a tax deduction and then you invest in renewable energy to get the tax deduction, that's tax avoidance. The primary purpose of making the investment is to reduce your tax burden and if it wasn't a deduction (i.e. it didn't allow you to avoid taxes) then you'd have bought the power from the power company instead. But causing you to change your behavior in order to avoid taxes is the purpose behind making that a tax deduction.

If you're deciding where to put your facility and the decision comes down to which jurisdiction has a lower tax rate, that's tax avoidance. You're avoiding taxes in the higher tax jurisdiction by putting your operations in the lower tax jurisdiction. But that is likewise the intended purpose of the lower tax rate. That jurisdiction wants businesses to set up there, or wants local businesses to have more money so they build more facilities and hire more local people etc.

If the government raises the tax on cigarettes and that causes you to quit smoking... you get the idea.

It makes no sense for it to be illegal for you to do the thing the government intentionally passed law to give you the incentive to do. But more than that, how are they supposed to prove it? They claim you quit smoking to avoid the tax, you claim it was because you didn't want to get cancer.

Hypothetically they could uncover some email in which you were complaining about the high taxes before you quit, but that doesn't actually prove anything -- the tax could make you chafe even if your primary purpose was to avoid cancer. Moreover, the well-counseled entity is not going to write that email, which makes it a law against writing something down rather than a law against doing something, and those are the worst because the evil megacorps who know they're doing something shady make sure to cross all their t's and the ones who get punished are the guileless ones who didn't know there was effectively a law against complaining about taxes.

The word evade has a specific meaning in English, implying avoidance by trickery. And it has a specific legal meaning, which is knowingly bending or breaking the law. They are not synonyms, especially in a tax context.

So are you telling us when you prepared your recent tax return, you spent zero time ensuring you paid only the required amount?

Avoiding paying taxes you are not legally required to pay is not tax evasion.

There will always be legal (but arguably immoral) ways to minimise your taxes, and there will always be illegal ways to minimise your taxes. Those are different problems with different solutions. It's a useful distinction to make, that warrants having different words.

Its a technicality created by government tax authorities and prosecutors

They say avoidance is legal, evasion is illegal and the name of a prosecutable crime

I mean, the clear way to deal with this is to make them choose, and allow import tariffs. Get taxed where the nexus is, and pay to bring the value to other jurisdictions.

I understand that the web of various tax laws and trade agreements makes this impossible though. 80 years of cruft is too much to sift through to improve things in one fell swoop I suppose.

It can definitely contribute to the feeling of being stretched thin

No it’s because an un-elected class of political invents new ways to launder our money over and over. How else does a politician with a small salary end u on millionaire over and over? They do not get book and consulting deals out of the goodness of the public hearts

Given that 100% tax compliance at the highest rates would not solve any high tax nation’s budget holes

You should be asking the same questions that companies are asking: instead of “why arent we getting hosed equally” its “why are we getting hosed at all”

I understood it more as "the individuals should be taxed the same (so, much lower amount) as corporations".

If company X can pay just <small percent> of their income as taxes (all together), why can't random bobby do the same?

The law requires you to have a fire extinguisher in your office? Sure, buy one, but since it's a cost of doing business, that money comes from the pre-tax pile and is not taxed extra. The law requires me to wear pants when I go out, why do i have to buy them from post-tax pile of money (so, after ~50% gone to the government), and still pay 9.5% VAT on them? I can buy those same black jeans as a company (eg. consider black jeans a work uniform), and avoid all those taxes). Rent? Pre-tax money for a comoany, post-tax for an individual. In some countries (eg. mine, slovenia) you have even bigger stupidities... you have a CO2 tax (and some other) on gasoline (and other fuels), and you pay VAT on top of that tax... the co2 tax included in the base to calculate the VAT... you literally pay taxes on taxes. Again, businesses don't have to pay that VAT (they deduct it) because well.. they need the company car to do business.

what's backwards about that? driving to the neighboring town for cheaper gas (because the gas tax happens to be lower) is just as legal as these complex multijurisdiction incongruencies

yes, I believe car ownership should be more accessible to people to be able to ponder such a drive

It's advocating for equality! how could you call that "backward"?

As well as killing local competition there's also the pure hypocrisy of firms such as Apple (and they're not the only offender) passing themselves off as some kind of moral authority whist at the same time aggressively refusing to pay taxes towards hospitals and schools in the local markets they operate in.

They can present themselves anyway they like but it does leave a bad taste in the mouth.

Which, to me, looks very subpar rather than companies paying taxes in the country where they actually make profit

Ordinary people do not buy stock. Most people here are in the highest percentile and it shows.

That's what I call a "let them eat cake" response.

They can't, because companies these days only go public after most of their growth has already been captured by private equity (if at all).

Perhaps the infograph I saw was per capita?

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