Monday, 4 May 2009

Will the Dutch sandwich survive? Not about food but taxes or rather avoiding them

The Obama administration appear to be following through with serious intent on dealing with tax evasion through offshore havens.

This single fact from a piece in the New York Times highlights why this issue has moved towards the top of the agenda rather than being a back burner issue.
American multinational corporations paid only $16 billion in U.S. tax on $700 billion in foreign earnings — an effective tax rate of 2.3 percent -- in 2004, the most recent year for which data are available, according to the White House. A fact sheet said that nearly one-third of all foreign profits reported by such corporations in 2003 came from three small low-tax countries: Bermuda, the Netherlands and Ireland.
Reading this list reminded me of my days in the entertainment industry when nearly all deals involving licenses of copyrights used the Dutch sandwich structure. For those not familiar with them they involve using tax treaties between the Netherlands and most other major jurisdictions and back to back arrangements with companies (usually letter box companies) in the Dutch Antilles. If you want to know more you should consult a good international tax attorney.

It will be interesting to see whether these types of structures which are still widespread are going to have to be recast. Somehow I doubt it.

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