Double Irish / Dutch Sandwich

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pages: 363 words: 92,422

A Fine Mess by T. R. Reid

Affordable Care Act / Obamacare, Bernie Sanders, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Donald Trump, Double Irish / Dutch Sandwich, game design, Gini coefficient, High speed trading, Home mortgage interest deduction, Honoré de Balzac, income inequality, industrial robot, land value tax, loss aversion, mortgage tax deduction, obamacare, Occupy movement, offshore financial centre, oil shock, plutocrats, Plutocrats, race to the bottom, Ronald Reagan, seigniorage, Silicon Valley, Skype, Snapchat, sovereign wealth fund, Tesla Model S, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, We are the 99%, WikiLeaks

Corporations Pay 35%,” Wall Street Journal, Oct. 27, 2013, www.wsj.com/articles/SB10001424052702303902404579152271744452490. 6. Offshore Profit Shifting and the U.S. Tax Code—Part 2 (Apple Inc.), U.S. Senate Permanent Subcommittee on Investigations, May 21, 2013, 152–91. 7. Jesse Drucker, “‘Dutch Sandwich’ Saves Google Billions in Taxes,” Bloomberg Businessweek, Oct. 22, 2010. Another excellent explanation of Google’s “Double Irish” system can be found in Cyrus Farivar, “Silicon Valley Fights to Keep Its Dutch Sandwich and Double Irish Loopholes,” Ars Technica, Jan. 20, 2014. 8. Offshore Profit Shifting and the U.S. Tax Code—Part 1 (Microsoft and Hewlett-Packard), U.S. Senate Permanent Subcommittee on Investigations, Sept. 20, 2012, 180–81. 9. Shayndi Raice, “Behind the Surge in a Hot Trend: Skadden Arps’s M&A Lawyers,” Wall Street Journal, Aug. 6, 2014, B1. 10.

This maneuver, fully legal, meant that Apple could use the money it held overseas to provide cash at no cost in the United States—without a penny to the tax man. For all Senator McCain’s ire, Apple’s subsidiary-of-a-subsidiary-of-a-subsidiary structure—the scheme that placed $74 billion beyond the reach of the tax authorities—was actually not as convoluted as another tax-dodging contraption, the intricate mechanism known as a “Double Irish with a Dutch Sandwich.” This one works nicely to shield profits from the tax man for companies that have a good deal of intellectual property, like search engines, software, cancer drugs, or computer operating systems. The “Double Irish” has been used by the likes of Apple and Microsoft, but it’s generally agreed, among aficionados of tax avoidance, that the paradigm case of this particular apparatus is Google’s international tax shifting, which is complicated to the point of being difficult to pin down precisely

Congress, 5, 10 See also charitable contributions; mortgage interest deductions; tax breaks Delaware, 19, 160, 204 Democrats, 43, 60, 64–68, 117, 132, 148, 162, 188, 190, 245 Denmark, 38, 102, 105, 120 government spending in, 23, 126 high tax rates of, 17, 19 property taxes in, 175 simple tax returns of, 221 tax revenues of, 14, 16, 79, 126 VAT rates of, 239 Depardieu, Gérard, 133–34, 139, 151 depletion/depreciation allowances, 64–66, 69–70 derivatives, 181, 184 dividends, 6, 9, 23, 36, 55, 70, 111, 147, 168, 170, 173, 193, 233, 241, 254, 256 “Double Irish with a Dutch Sandwich,” 151–53, 161, 164 Douglas, Roger, 60–61 dynamic scoring theory, 101 earned income tax credit (EITC), 210, 217–18, 238, 250 East Asia, 21, 23, 228 eastern Europe, 93–95, 101–14 economic growth, 16, 36, 41–43, 50, 52, 55, 91, 101, 104–8, 114, 120, 124, 136, 238 economic impact of taxes, 16, 95, 100–101 Economic Recovery Tax Act of 1981 (ERTA), 64 Economist magazine, 58, 104, 126 education, 36, 44, 53, 63, 70, 79, 84, 105, 117–18, 123, 126–27, 168, 175, 180, 221 Egypt, 200, 239 Eisenhower, Dwight, 2 electronic trading, 181–84 emissions.


pages: 429 words: 120,332

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson

Asian financial crisis, asset-backed security, bank run, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, failed state, financial deregulation, financial innovation, Fractional reserve banking, full employment, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Long Term Capital Management, Martin Wolf, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, The Spirit Level, too big to fail, transfer pricing, Washington Consensus

The general idea is that by adjusting its internal prices a multinational can shift profits offshore, where they pay little or no tax, and shift the costs onshore, where they are deducted against tax. In the banana example, tax revenue has been drained out of a poor country and into a tax haven and funneled through to the wealthy owners of a multinational corporation. In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games known by names such as the “Double Irish” and “Dutch Sandwich,” ending up with an overseas tax rate of 2.4 percent.7 The problem is getting worse. Microsoft’s tax bill has been falling sharply, for similar reasons. Cisco is at it.8 They are all at it. Transfer pricing alone cost the United States an estimated $60 billion a year9—and that is just one form of the offshore tax game. Worldly readers may still shrug and tell themselves that this is just part of the ugly flipside of living in a rich nation.

., 67–8, 78–84 City of London Corporation (Corporation of London), 70–4, 76, 85–6, 224, 242n25, 243n36–37, 244n72 head of: See Lord Mayor of London history of, 71–2 and voting rights, 71 civil society, 170 Clinton, Bill, 52, 119–20, 150, 160 Clinton, Hillary, 30, 58 Coalition for Tax Competition, 150 Cold War, 75, 109, 138 Coleman, Norm, 121 Colombia, 26, 101, 111, 133, 136 Medellin drug cartel, 101, 133 colonialism, 2–8, 20, 23, 65, 88–9, 93–5, 104–5, 117, 138, 147, 161, 184 Commodity Futures Trading Committee (CFTC), 68 Compact of Free Association, 22 comparative advantage theory, 16 competition, tax, 149–56 Confidential Relationships (Preservation) Law, 101–2 Congdon, Tim, 66 ConocoPhilips, 22 Cook, Geoff, 168 Cornfeld, Bernie, 97–8 corporate governance, 39, 85, 122–5, 201–2 corporate responsibility, 228–9 The Corporation (Bakan), 158 Corporation Trust (Delaware), 125–6 corruption, 126–8, 229 Corruption Perceptions Index (CPI), 126 country-by-country reporting, 222 Cowperthwaite, Sir John, 105 Craven, John, 81 credit cards, 193–201 criminal money See arms trafficking; bribes; drug money; mob/mafia; terrorist financing Crocodile Dundee, 33 Crook, Kenneth, 93–5 Cuba, 88–9, 93 currency trading, 63–4, 70 Cyprus, 10, 27, 33, 138, 238n52 Dai Xianglong, 86 Davison, Daniel, 81 Deepwater Horizon, 22 de la Torre, Lisandro, 36, 38, 46–7 de Rugy, Veronique, 150 deferrals, tax, 112–13 Delaware, 22, 26, 39–40, 120–1, 123–6, 150, 166, 193–201, 204, 207–12, 214, 222, 228, 247n31, 248n34,39,42, 254n3,4, 255n18, 256n40 Chancery Court, 124–5, 248n34 Corporation Trust office, 125–6 history of offshoring, 39–40, 123–6 and jurisdictions, 193–201, 204, 207–12, 214 and securitization/bundling, 26, 125 and usury, 193–5, 200, 204 Delaware Statutory Trust Act (1988), 201 DeLay, Tom, 160–1 Deloitte & Touche, 25, 202, 209 DeLong, Bradford, 49, 55, 158–9 democracy, 7–8, 13, 31, 33, 42, 56, 71, 82, 102, 113, 123, 129, 131, 144–8, 162, 164, 170, 182, 185, 189, 192, 195–6, 198, 206, 210, 212, 219, 222, 224 and taxation, 144–8 Democratic party, 31, 82, 123, 185, 195, 198, 254n4 Democratic Republic of Congo, 131 deregulation, 32, 52, 66, 74–6, 85, 87, 115, 129–30, 132, 155, 159, 182, 193, 200, 209–10, 212, 217 developing countries, 8, 28–30, 57–60, 91, 93, 97, 100, 108, 126, 129–48, 155–6, 164, 169, 183, 217, 222–5, 227, 229, 236n29, 237n44, 240n22, 246n13, 250n26 and blame-the-victim, 8, 29, 140–4 and capital, 57–60 and capital flight, 139–43 and mobile phone charges, 148 and the offshore system, 129–48 and reform, 223–4 and sovereign debt funds, 143–4 and tax, 144–8 and tax treaties, 147–8 See Bank of Credit and Commerce International Deviers-Joncour, Christine, 5 Dill, James B., 39 Disney, 7, 88 Double, Paul, 73 double taxation, 26, 41–2, 130, 146 defined, 26 “Double Irish,” 14 drug money, 6, 9, 18, 20, 22, 26–7, 29, 88, 101–2, 111, 120, 131–3, 136 du Pont, Pierre S. (“Pete”), 194–9 Dubai, 19 Duggan, Nick, 165–6 “Dutch Sandwich,” 14, 117 Dutch Special Financial Institutions, 27 Dumas, Roland, 5 The Economic Consequences of the Peace (Keynes), 50 Ernst & Young, 25, 202, 205, 209, 249n5 The Economist, 7, 22, 24, 237n36 “efficiency,” 16, 41, 53, 130, 153–4, 158–66, 214, 219, 229–30 Egypt, 65–6, 86 Elf Aquitaine (France), 2–8, 20, 28, 70, 131, 136 elites/the rich, 2–4, 6–10, 11, 16–17, 20–3, 26, 30–2, 35, 59, 90–1, 100, 106, 126, 131, 140–5, 148, 157–8, 185, 187, 192, 195, 210, 224 Elmer, Rudolf, 147–8, 192, 214–15 Engels, Friedrich, 104 Enron, 23, 68, 132, 166, 202, 204, 218 Eurobonds, 75–6 Eurodad, 30 Eurodollar market: See Euromarket Euromarkets, 11, 66–7, 75, 77–83, 112, 114, 129–30, 241n11, 243n59 reserve requirements, 76–8 Euromoney, 80 European tax havens, 16–17, 21, 23 See Austria; Belgium; Euromarkets; Luxembourg; Netherlands; Switzerland ExxonMobil, 108 Fairchild Corp.

They wanted American companies to borrow overseas, but they wanted to keep the 30 percent tax too, for the revenue. How to square this circle? At first, they settled for a compromise. American corporations could cook up a version of what was known as a “Dutch Sandwich”—set up an offshore finance subsidiary in the Netherlands Antilles, then use it to issue tax-free Eurobonds and send the proceeds up to the American parent. The United States could argue that it did not have to tax this income from the Antilles, under the rules of its tax treaty with this former Dutch colony via its postcolonial relationship with the Netherlands. The U.S. Internal Revenue Service could easily have decided that the Dutch Sandwich was a sham and taxed the income. But it looked the other way. “These were Eurobonds, bearer bonds, which were virtually impossible to tax,” explained Michael J. McIntyre, a top U.S. expert on international tax, who was one of very few people in the United States to have opposed this at the time.


pages: 417 words: 97,577

The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game

“There is government,” he wrote, “whenever one person or group can tell others what they must do and when those others have to obey or suffer a penalty.”18 Under Hale's definition, the tech giants are effectively governments unto themselves. In tax matters, the companies stand effectively beyond the laws of national governments, playing one country against another in a race to the bottom. Their arrangements mock national governments. Facebook, Google, and other tech companies have used arrangements known as a “Double Irish” and a “Dutch Sandwich,” to shield the majority of their international profits from the taxman. They shift revenue from one Irish subsidiary to a Dutch company with no employees, and then on to a Bermuda mailbox owned by another Ireland-registered company.19 It is a farce, and it is all perfectly legal. The ultimate loss from unpaid taxes is an estimated 60 billion euros a year for the weakest members of the European Union.20 While individuals and small businesses pay high levels of taxes, the share of corporate profits that multinationals have reported in tax havens has increased tenfold since the 1980s; much of this is coming from the large tech companies.21 The tech giants increase income inequality, because the losers are the people and small businesses who do pay taxes and the winners are the shareholders of the companies that use them to dodge taxes.22 The tech giants preach social solidarity and not being evil (Google recently decided to drop their motto “Don't be evil,” as it seemed out of fashion), while they funnel billions into offshore havens and channel their European operations through tax-friendly Ireland.

., 83 Cartels Chicago School perspective, 23 promotion, central bank rates (impact), 26f study, 25 Cartels: A Challenge to a Free World (Berge), 150 Castellammarese War, 21 CBS Corporation, market dominance, 133 CelebrityNetWorth, Google data theft, 89–90 Central Selling Organization, 24 CEO-to-worker compensation ratio, increase, 221f Chamberlin, Edward, 7 Chambers, Dustin, 179 Chemotherapy regulation, 167 usage, 178 Chicago School, 155–156 China, Big Data/Big Brother (relationship), 112 Chipotle, McDonald's release, 56 Christensen, Clayton, 55 Citigroup, market dominance, 127 Civil government, instituting, 191 Clayton Act of 1914, 7 Clayton Antitrust Act (1914), 144, 160, 209 Clemenceau, George, 233 Clifton, Daniel, 187 Clinton, Bill (reverse revolvers), 191 Clinton, Hillary, 189, 212 Coal Question, The, ( Jevons), 18 Cohn, Gary, 189 Collusion, impact, 32 Community Standards (Facebook), 92 Commuting zones, labor concentration (increase), 73f Companies growth phases, 52f lobbying, returns (comparison), 187f long-term returns, 204 platform companies, 97–98 self-disruption, failure, 55 synergies, 41 technology purchases, 106 Competition absence, 241 encouragement, patents (expiration), 246 Google, impact, 95 patents, impact, 175 promotion, patents/copyrights (impact), 246 reduction, mergers and acquisitions (impact), 12 restoration, Representative/Senator encouragement, 248 Competitors conflict, 31 reduction, mergers (prevention), 242 Composition, fallacy, 18 Computer operating systems, monopolies/local monopolies, 117 Concentrated industries, ranking, 33t Concrete, mergers (impact), 43 Confessions of the Pricing Man (Simon), 29 Conglomerates, purchase, 154 Connor, John, 23 Conrad, Jeremy, 54 Consumers, desires, 115 Consumer welfare, 158–159 Contract workers, hiring (fervor), 75–76 Copyrights, 246 Copyright Term Extension Act, 174 Corbyn, Jeremy (selection), 212 Corporate profits employee compensation, contrast, 223f increase, 65 Corporate trusts, control, 234 Costco workers, needs (understanding), 77 Counterfeits, impact, 102–103 Cox, Archibald, 157 CR4, 33 Creating and Restoring Equal Access to Equivalent Samples Act (CREATES), 176 Creative destruction, process, 45 Credit reporting bureaus, oligopolies, 125 Credit Suisse, Global Wealth Report issuance, 218 study, 10 Crisis of Capitalism, A, (Posner), 156 Curry, Steph, 3 Curse of Bigness, The, (Brandeis), 237 Customer lock-in (reduction), rules (creation), 246 CVS Caremark, market dominance, 130 D Dairy Farmers of America, price fixing, 119 Dalio, Ray, 229 David, Larry, 89 DaVita, Fresenius (merger), 124 Dayen, David, 96 Dean Foods, price fixing, 118–119 De Beers Consolidated Mines (cartel), 24 Decartelization Branch, 151–152 Decartelization/deconcentration policy, 150–151 Decker, Ryan, 47 Decline of Competition, The, (Burns), 145 de Loecker, Jan, 41, 226 Dent, Robert, 52 Diapers.com, Amazon predation, 106 Dickens, Charles, 18 Digital Millennium Copyright Act, 103 Digital platforms, scale, 91 Dimon, Jamie, 182 Dirlam, Jeff, 167 Disraeli, Benjamin, 240 Diversity, impact, 58–61 DNA damage, 178 Dodd-Frank Act 2010 Full Employment Act for Lawyers, Accountants, and Consultants, 182 impact, 181 passage, 184 Döttling, Robin, 56 Doubleclick, Google acquisition, 91, 118 “Double Irish” arrangement, 92–93 Dow Chemicals, DuPont (merger), 121 Dreyfus, market dominance, 133 Drugs prices, high level, 174 reformulation, 175 wholesalers, oligopolies, 131–132 Duisberg, Carl, 146–147 Duke, James Buchanan, 142 Duke, Mike, 16 Dunbar's Number, creation, 51 Duopolies, 15, 115–116, 122–125 Durant, Will, 231 Düsseldorf Agreement, 148 “Dutch Sandwich” arrangement, 92–93 E Echo Show (Amazon), 107 Economic dynamism, reduction, 37 Economic freedom, 143–144, 233, 238–239 Economic inequality, increase, 227–228 Economic model, adjustment, 41–42 Economies of scale, increase, 51 Economy advanced economies, markups (increase), 228f firms, role (decrease), 48f problems, Trump perspective, 213 Edison, Thomas, 67, 195 Eeckhout, Jan, 41, 226 Eisenhower, Dwight, 146, 148, 151 Ellenberg, Jordan, 214 Employees compensation, corporate profits (contrast), 223f perks, 75 Employers and Workmen Act, 240 Employment clauses, usage, 69 Ennis, Sean, 226 Entrepreneurship, decline, 46 Equifax, security breach, 81–82 Erhard, Ludwig, 153 Europe rebuilding, 153–154 ordoliberlism, 153 Evans, Benedict, 108 Evans, David, 106 Exchange-traded funds (ETFs), inexpensiveness, 203 Express Scripts, market dominance, 130 F Facebook church, Zuckerberg comparison, 113 Community Standards project, 92 creation, 117 Instant Articles, 102 lobbying efforts/expenses, 95–96 market dominance, 123–124 News Feed, impact, 99–100 news/information source, problems, 112–113 profitability/power, 99 Factory Act, 240 Fair Isaac's Corporations (FICO), credit-scoring formula, 125 Fast-food chains, employment clauses, 69 Federal Arbitration Act, 80, 82 Federal Express, duopoly, 3 Federal government Goldman Sachs, revolving door, 190f Monsanto, revolving door, 193f Federal Register, pages (number, increase), 181f Federal Reserve Act (1913), 209 Federal Trade Commission, 159, 163 creation, 144 Federation of British Industry, Düsseldorf Agreement, 148 Fidelity, market dominance, 135 Financial crisis (2007-2008), 25 Firms entry, reduction, 53f predatory pricing, punishment (laws), 244 role, decrease, 48f First American, market dominance, 135 Five Families, 22 Five Forces (Porter), 14–15 Fleming, Lee, 70–71 Forced arbitration, 79–81 Ford, Henry, 16 Foreign exchange traders, currency price fixing, 24 Foundem, 97 search problems, 87–88 Frankel, Jonathan, 107 Freight railroad, concentration, 119 Freireich, Emil, 176–177, 181 Friedman, Milton, 155, 179, 204, 233, 238 Funeral homes, monopolies/local monopolies, 121–122 Furman, Jason, 39 G Game theory, 26 Gates, Bill, 78 Geithner, Timothy, 190, 211 General Theory, The, (Keynes), 17 Germany German Decartelizing law (1947), 152 nationalist party, impact, 213 reconstruction, 151, 238 surrender, 151 Gerstner, Jr., Louis V., 50 Gibbons, Thomas, 137–138 Gibbons v.

Chapter 5: Silicon Valley Throws Some Shade 1. https://www.theregister.co.uk/2010/12/01/google_eu_investigation_comment/. 2. http://europa.eu/rapid/press-release_IP-17-1784_en.htm. 3. https://www.wired.com/story/yelp-claims-google-broke-promise-to-antitrust-regulators/. 4. https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html. 5. http://theweek.com/articles/693488/google-monopoly--crushing-internet. 6. https://theoutline.com/post/1399/how-google-ate-celebritynetworth-com. 7. https://www.idc.com/promo/smartphone-market-share/os. 8. https://www.netmarketshare.com/browser-market-share.aspx. 9. https://www.wsj.com/articles/how-google-swayed-efforts-to-block-annoying-online-ads-1518623663. 10. https://www.rollingstone.com/politics/features/taibbi-facebook-can-we-be-saved-social-media-giant-w518655. 11. https://www.forbes.com/sites/stevendennis/2017/06/19/should-we-care-whether-amazon-is-systematically-destroying-retail/#62085ff66b1f. 12. 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https://www.theguardian.com/commentisfree/2017/nov/08/tax-havens-dodging-theft-multinationals-avoiding-tax. 23. https://cyber.harvard.edu/interactive/events/conferences/2008/09/msvdoj/smith. 24. https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html. 25. https://www.theringer.com/tech/2018/5/18/17362452/microsoft-antitrust-lawsuit-netscape-internet-explorer-20-years. 26. https://www.wsj.com/articles/inside-the-u-s-antitrust-probe-of-google-1426793274. 27. https://theintercept.com/2016/04/22/googles-remarkably-close-relationship-with-the-obama-white-house-in-two-charts/. 28. https://www.recode.net/2018/1/23/16919424/apple-amazon-facebook-google-uber-trump-white-house-lobbying-immigration-russia. 29. http://www.stateofdigital.com/eric-schmidt-at-google-hearings-close-to-monopoly-but-weve-not-cooked-anything/. 30. https://laweconcenter.org/wp-content/uploads/2018/05/manne-the_real_reaon_foundem_foundered_2018-05-02-1.pdf. 31. https://www.salon.com/2015/11/24/googles_insidious_shadow_lobbying_how_the_internet_giant_is_bankrolling_friendly_academics_and_skirting_federal_investigations/. 32. https://www.nytimes.com/2017/08/30/us/politics/eric-schmidt-google-new-america.html. 33. https://qz.com/1206184/bill-gates-warns-silicon-valley-not-to-be-the-new-microsoft/. 34. https://www.npr.org/sections/thetwo-way/2017/06/27/534524024/google-hit-with-2-7-billion-fine-by-european-antitrust-monitor. 35. http://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/39740_14996_3.pdf. 36. https://www.newyorker.com/magazine/2017/08/28/who-owns-the-internet. 37. https://www.cjr.org/special_report/facebook-media-buzzfeed.php. 38. https://www.theguardian.com/technology/2017/oct/23/facebook-non-promoted-posts-news-feed-new-trial-publishers. 39. https://www.socialmediatoday.com/social-networks/complete-list-facebooks-misreported-metrics-and-what-they-mean. 40. https://www.socialmediatoday.com/social-networks/complete-list-facebooks-misreported-metrics-and-what-they-mean. 41. https://nypost.com/2016/11/03/facebook-sued-over-its-fraudulent-ad-metrics/. 42. https://www.broadcastingcable.com/news/facebook-s-video-move-may-aid-nielsen-comscore-168497. 43. http://adcontrarian.blogspot.com/2013/06/the-75-billion-ad-swindle.html. 44. https://www.theguardian.com/technology/2017/sep/07/facebook-claims-it-can-reach-more-people-than-actually-exist-in-uk-us-and-other-countries. 45. https://www.theguardian.com/technology/2017/mar/11/tim-berners-lee-web-inventor-save-internet. 46. https://staltz.com/the-web-began-dying-in-2014-heres-how.html. 47. http://www.vulture.com/2018/02/how-facebook-is-killing-comedy.html. 48. https://medium.com/humane-tech/tech-and-the-fake-market-tactic-8bd386e3d382. 49. https://staltz.com/the-web-began-dying-in-2014-heres-how.html. 50. https://www.rollingstone.com/politics/features/taibbi-facebook-can-we-be-saved-social-media-giant-w518655. 51. https://www.theatlantic.com/technology/archive/2018/04/amazon-may-have-a-counterfeit-problem/558482/. 52. https://www.theatlantic.com/technology/archive/2018/04/amazon-may-have-a-counterfeit-problem/558482/. 53. https://www.forbes.com/sites/stevendennis/2017/06/19/should-we-care-whether-amazon-is-systematically-destroying-retail/#62085ff66b1f. 54. https://www.yalelawjournal.org/note/amazons-antitrust-paradox. 55. https://www.theguardian.com/technology/2015/jun/23/amazon-marketplace-third-party-seller-faustian-pact. 56. https://www.forbes.com/sites/retailwire/2014/10/30/is-amazon-undercutting-third-party-sellers-using-their-own-data/#700a08a953d8. 57. https://www.propublica.org/article/amazon-says-it-puts-customers-first-but-its-pricing-algorithm-doesnt 58. https://rainforests.mongabay.com/0202.htm. 59. https://www.rand.org/pubs/research_briefs/RB77/index1.html. 60. https://www.ncbi.nlm.nih.gov/books/NBK236347/. 61. https://www.vox.com/new-money/2017/7/11/15929014/end-of-the-internet-startup. 62.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Although Obama has proposed rules that could make it tougher for companies to relocate abroad specifically for tax reasons, politicians haven’t made a dent in the usual offshore financial wizardry practiced by many of the country’s largest firms. These tactics are particularly common in sectors like finance, technology, and pharmaceuticals—that is, intellectual-property-driven industries in which the virtual nature of assets (ideas, formulas, patents, algorithms, and the like) makes it especially easy to shift profits to the cheapest possible tax jurisdiction, regardless of where they really came from. Ever hear of a double Irish? How about a Dutch sandwich? These aren’t cocktails or bar snacks but rather complex financial strategies used by many American companies to transfer profits they earn abroad to countries with the lowest tax rates. Despite the goofy nicknames, these techniques have a serious and nefarious purpose: to keep money away from the United States whenever possible so as to avoid paying the higher corporate tax rates in effect at home.

According to a source who attended that meeting and spoke to me off the record, one of the radical ideas attendees bounced around envisioned companies writing checks to social media users, based on how much their data streams are monetized by these firms.8 But in terms of how to reward makers over takers, tax reform remains the largest and most immediate fight. The US code is ripe for an overhaul, in both the corporate and the consumer sphere. Tax inversions, Dutch sandwiches, and Cayman Islands wizardry that expatriate the gains of American corporations to enrich a tiny managerial caste suggest a whole new genre of selfish capitalism. As this book has attempted to illustrate, globalization and financialization, working hand in hand, allow firms to fly thirty-five thousand feet over the problems of both individual nations and people, who are all too familiar with the reality on the ground: an economy in which wages still aren’t rising fast enough, good middle-class jobs remain hard to come by, and public deficits remain large, since the private sector won’t spend on real-economy investments to fill the void.

The Irish system can be further exploited if a US firm sets up a second overseas subsidiary in Ireland to manage non-US sales on patents. American firms do a lot of this, redirecting to the most tax-advantageous country the intellectual property that may have been the work of many people in many countries. Basically, this strategy funnels the profits from the knowledge economy, where the innovation actually occurred, to a different economy that offers the cheapest cash haven. Firms can go further and add a “Dutch sandwich” onto this maneuver. Because there are European Union tax agreements in place that allow money to move freely between EU countries, American firms can set up Dutch subsidiaries and transfer more money from more countries into Irish subsidiaries. The whole thing creates a global race to the bottom, which underscores one of the key problems of tax avoidance: the so-called “tragedy of the commons” where, in the end, everyone loses.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Gordon Gekko, high net worth, Hyman Minsky, information asymmetry, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

A country known for its emerald greenery and rain, it is also a key node in the global hub of financial engineering. In fact, Ireland is so central to international financial opacity that it lends its name to a highly-sought-after product: a double Irish sandwich. The ‘sandwich’ refers to an accounting and tax scheme which allows companies to avoid taxation. Since the late 1980s it has been mostly been used by US multinationals to avoid corporate taxation on all non-US profits. Historically, Double Irish is the largest tax avoidance tool. It has enabled US companies to shield around $100bn annually from taxes. Double Irish has often been paired with the Dutch Sandwich – another tax avoidance instrument. Although the US authorities were aware of the scheme, it was the EU that in October 2014 forced Ireland to close the scheme, with effect from January 2015.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar

Luxembourg’s arrangements with Amazon and McDonald’s are also under investigation, following revelations that it had made secret deals with hundreds of companies. Whatever their legality, these schemes are a means by which firms obtain substantial rental income. Even more egregiously, some multinationals have exploited anomalies in the tax rules of different jurisdictions, using devices such as Google’s famous ‘Double Irish with a Dutch sandwich’ to move profits to tax havens such as Bermuda where the corporate tax rate is zero. In 2011, nineteen subsidiaries registered in Ireland used the ‘Double Irish’ to avoid tax on €33 billion of profits, equivalent to a fifth of the country’s economic output that year. Perhaps the biggest source of corporate tax avoidance is the parking of profits offshore by US companies, induced by the US tax system. While most countries operate a territorial tax system, taxing only profits deemed to arise in their jurisdictions, the US taxes companies and individuals on their worldwide income.

After complaints from other EU countries, notably Germany, the rules were tightened to tie the concession more closely to patents linked to research and development in Britain. But companies can still claim a reduced rate on patents they have bought in or that arise from outsourced research. France, Luxembourg, Spain, Portugal, Italy and the Netherlands (which has a concessionary rate of just 5 per cent) are among countries that operate a patent box. Ireland, which under pressure closed a related tax-dodging loophole known as the ‘Double Irish’, is introducing a patent box with a concessionary rate of 6.25 per cent. The ostensible purposes of patent boxes are to encourage firms to do more research and to attract ‘knowledge-intensive’ multinationals. But they are in reality another beggar-my-neighbour subsidy that leaves no one better off except the corporations. The money to make up the loss must come from higher taxes on labour and consumption or from cuts in public spending.

W. 1, 2 buy-to-let mortgages 1, 2 Cadbury 1 Calmard, Pierre 1 Cameron, David 1, 2, 3, 4, 5, 6 Campaign for Better Transport 1 Cancer Fund of America 1 CAP (Common Agricultural Policy) 1, 2 Capita 1 Capital in the Twenty-First Century 1, 2 Care UK 1 Carlyle Group 1 Carlyle, Thomas 1 Carnegie Institute 1 Carney, Mark 1, 2 Cato Institute 1 Caxton Associates 1 Cerberus 1, 2 CERN (European Organization for Nuclear Research) 1 CETA (Comprehensive Economic and Trade Agreement) 1 charities/charitable donations 1, 2 Charter of Liberties (1215) 1, 2 Charter of the Forest (1217) 1, 2, 3, 4 Chen, Edward 1 Chernukhin, Vladimir 1 Cheshire, Sir Ian 1 Chicago school 1, 2 China Investment Corp. 1 Christensen, Clayton 1 churches 1 circuits of power 1 Citizens Advice 1 Citizens for Tax Justice 1, 2 Citizens UK 1 Citizens United 1 civil commons 1 Clare, John 1 Clickworker 1 climate change 1, 2, 3, 4 Clinton, Bill 1, 2, 3 Clinton, Hillary 1, 2, 3, 4 cloud labour 1 ‘cognitive capitalism’ 1 Coke, Edward 1 collective bargaining 1, 2, 3 Commissioning Support Industry Group 1 commodification 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 Commodity Futures Trading Commission 1 commons 1 and allotments 1 civil commons 1 commodification of 1, 2, 3, 4, 5, 6, 7, 8, 9 and ‘contrived scarcity’ 1, 2, 3 cultural commons 1 and enclosure 1, 2, 3 and Hartwick’s Rule 1, 2, 3, 4 intellectual commons 1 and Lauderdale Paradox 1 and neo-liberalism 1, 2, 3, 4, 5, 6, 7 and precariat 1, 2, 3, 4, 5 revolt of 1, 2, 3, 4, 5 and privatisation 1, 2, 3, 4, 5, 6, 7, 8, 9 social commons 1 spatial commons 1, 2 and universal justice 1 Commons Act (1876) 1 Commons Preservation Society 1 comparative advantage 1, 2 Competition and Markets Authority 1 ‘competitiveness’ concept 1, 2, 3, 4, 5, 6, 7 ‘concierge’ economy 1 Congressional Budget Office (US) 1 Constitution (US) 1 ‘contrived scarcity’ 1, 2, 3, 4, 5 copyright 1, 2 Copyright Act (US, 1790) 1 Corbyn, Jeremy 1 Corporate Europe Observatory 1 corporate welfare 1 corporation tax 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 Couchsurfing 1 Coulson, Andy 1 County Smallholdings Estate 1 ‘credentialism’ 1 ‘creditocracy’ 1 Crime and Disorder Act (1998) 1 ‘crony capitalism’ 1, 2, 3, 4, 5 Crosby, Lynton 1, 2 Crowdcube 1 CrowdFlower 1, 2, 3 crowdfunding 1, 2 crowd-sourcing 1 ‘crowdwork’ platforms 1 cultural commons 1 Cup Trust 1 Daily Mail 1, 2, 3 Daily Mirror 1 Daily Star 1 Daily Telegraph 1 Darling, Alistair 1 ‘data exclusivity’ 1 ‘deadweight effect’ 1 debt and austerity 1, 2, 3 and banking systems 1, 2, 3, 4, 5 cancellation of 1 as exploitation 1 household debt 1, 2, 3, 4 housing debt 1 and mental health 1 platform debt 1 and precariat 1, 2 and predatory creditors 1 public and private 1, 2 and rentier capitalism 1, 2, 3, 4, 5, 6, 7 and securitisation 1, 2 and social policy 1 student debt 1, 2 and tax breaks 1 ‘debt overhang’ 1 deindustrialisation 1, 2, 3 democracy and banking systems 1, 2, 3, 4, 5, 6, 7 circuits of power 1 commodification of 1, 2 and education 1 and Goldman Sachs 1 lobbying 1, 2 and media 1, 2 and Mont Pelerin Society 1, 2 and neo-liberalism 1, 2, 3 party politics 1 and plutocracy 1, 2, 3, 4, 5 political consultancy 1 and precariat 1, 2 and privatisation 1 and rentier capitalism 1, 2, 3, 4, 5, 6, 7 and revolt of precariat 1, 2 ‘thinning’ of 1 Desmond, Paul 1 Didi Kuaidi 1 digital platforms see rentier platforms direct subsidies 1 Discipline and Punish 1 Disney 1, 2 ‘distress’ debt 1 Doha Round 1, 2 ‘Double Irish’ 1, 2 Draghi, Mario 1, 2, 3 Drutman, Lee 1 Dudley, William 1 Duncan Smith, Iain 1 Dutch Disease 1 ‘earnings stripping’ 1 Easton, Jim 1 easyCar Club 1 eBay 1 EBRD (European Bank for Reconstruction and Development) 1, 2 Economist, The 1, 2, 3, 4, 5, 6, 7, 8, 9 Ecosystem Markets Task Force 1 education 1, 2, 3, 4, 5, 6, 7 Edward I, King 1 Einaudi, Luigi 1 Einstein, Albert 1 EITC (Earned Income Tax Credit) 1 Electoral Commission 1, 2 Elizabeth II, Queen 1 Elsevier 1 enclosure 1, 2, 3 Encore Capital 1 ‘entrepreneurial’ debt 1 Equity Lifestyle Properties 1 Erhard, Ludwig 1 EU membership referendum (2016) 1, 2 European Central Bank (ECB) 1, 2, 3, 4, 5, 6 European Patent Office 1 ‘euthanasia’ of rentiers 1, 2, 3, 4, 5, 6, 7 Evening Standard 1 ‘ever-greening’ 1 exchange value 1, 2, 3 Facebook 1, 2 Faraday, Michael 1 Farmer, Michael 1 ‘Faustian bargain’ 1, 2, 3 FDA (Food and Drug Administration) 1 Federal Reserve 1, 2, 3, 4, 5, 6 Feinberg, Stephen 1 Financial Services Authority 1 Financial Times 1, 2, 3, 4, 5, 6, 7 Fisher, Sir Antony 1 Fitzgerald, F.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

accounting loophole / creative accounting, Albert Einstein, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, Boris Johnson, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, Kickstarter, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, Plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

63 Like all companies and other organisations, these businesses depend on a workforce and a customer-base that is educated, a health system that keeps their workers healthy and a public infrastructure, including a legal system. While the little people pay their taxes for all these things and more, many incredibly wealthy companies free-ride on them. The double Irish and the Dutch sandwich Google’s sixth ‘core value’ is: ‘Do the right thing: don’t be evil. Honesty and Integrity in all we do. Our business practices are beyond reproach. We make money by doing good things.’64 Google cut its taxes by US$3.1 billion, using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda. These strategies, known to lawyers as the double Irish and the Dutch sandwich, helped Google to reduce its overseas tax rate to 2.4%.65 Margaret Hodge, who chairs the UK parliament’s Public Accounts Committee, took Google’s UK Vice-President, Matt Brittin, to task over this: ‘You are a company that says you “do no evil”.


pages: 241 words: 63,981

Dirty Secrets How Tax Havens Destroy the Economy by Richard Murphy

banking crisis, barriers to entry, Bernie Sanders, centre right, corporate governance, Donald Trump, Double Irish / Dutch Sandwich, en.wikipedia.org, high net worth, income inequality, intangible asset, light touch regulation, moral hazard, Occupy movement, offshore financial centre, race to the bottom, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, transfer pricing, Washington Consensus

Another deliberate tax haven is the Netherlands. It has secured international notoriety by exploiting double tax agreements to let royalties on copyrights and patents, dividends, and capital gains flow through it in a way that ensures tax charges are minimised. So successful has this been that the head offices of many US-owned European entities are located there, and tax abuse has been widely reported: Google, with its so called ‘Dutch Sandwich’, is the most obvious example. Luxembourg competes with the Netherlands for this business. Secrecy Jurisdictions The very diversity of tax havens, however, has caused all sorts of problems for those trying to tackle the issues to which they give rise. This is why some tax havens have in recent years been re-categorised as secrecy jurisdictions (see Chapter 2). This trend started in civil society but has now become widespread, and makes specific reference to those places that not only provide deliberately favourable tax regimes to those not usually resident in a place (such as Ireland the and Netherlands), but also, in various ways, provide a veil of secrecy to those making use of these tax arrangements.

It should be noted that this survey was inspired by work I had previously undertaken, but was more comprehensive. 16.OECD, ‘Table II.1 Corporate Income Tax Rate’, at stats.oecd.org. 17.OECD, ‘Transfer Pricing: Keeping It at Arm’s Length’, OECD Observer 230 (January 2002), at oecdobserver.org. 18.House of Commons Committee of Public Accounts, ‘Tax avoidance: the role of large accountancy firms’, Forty-fourth Report of Session 2012-13 19.A valuable critique is available at All-Partyt Parliamentary Group: Responsible Tax, ‘Response from: BEPS Monitoring Group’, 21 January 2015, at appgresponsibletax.org.uk. 20.For an example, see Leonid Bershidsky, ‘Goodbye Double Irish, Hello Knowledge Box’, 15 October 2015, at bloomberg.com. 21.Richard Rubin, ‘US Companies Are Stashing $2.1 Trillion Overseas to Avoid Taxes’, Bloomberg.com, 4 March 2015, at bloomberg.com. 22.Alison Smith, ‘Corporate Cash Piles Escape Osborne’s Gaze’, Financial Times, 18 March 2015. 23.KMPG, ‘Corporate Tax Rates Table, at home.kpmg.com. 24.Department of Finance, Republic of Ireland, ‘Effective Rates of Corporation Tax in Ireland: Technical Paper, April 2014’, pdf at budget.gov.ie. 25.R.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business cycle, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost airline, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, MITM: man-in-the-middle, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

They can allocate their profits on lucrative patents on iPads and iPhones to their overseas operations or they can sell software applications from low-tax countries overseas, shifting around tens of billions in income from country to country with legal but cleverly devised bookkeeping to avoid taxes in the United States and in other countries, too. Earlier this year, The New York Times reported that Apple had pioneered an accounting technique known as the “Double Irish with a Dutch Sandwich,” which cut Apple’s taxes drastically by routing profits through Irish subsidiaries to the Netherlands and then to the Caribbean. Today, hundreds of other U.S. corporations have copied tactics invented by Apple, which, in 2011, paid only $3.3 billion in taxes on $34.2 billion in profits. Under current tax law, U.S. multinationals are allowed to write off all their overseas costs immediately, even though they don’t pay tax on those overseas profits until the money is repatriated.

., “Corporate Taxpayers & Corporate Tax Dodgers 2008–10,” Citizens for Tax Justice and Institute on Taxation and Economic Policy, November 2011, http://​www.​ctj.​org; John McKinnon, “Business Roundtable: We Pay Enough Taxes, Thank You,” The Wall Street Journal Washington Wire, April 14, 2011. 66 Others cashed in heavily on loopholes Aviva Aron-Dine, “Well-Designed, Fiscally Responsible Corporate Tax Reform Could Benefit the Economy,” Center on Budget and Policy Priorities, June 4, 2008, http://​www.​cbpp.​org. 67 The multinationals that have been most successful McIntyre, “Corporate Tax Dodgers.” 68 Companies that pay roughly 35 percent Catherine Rampell, “Winners and Losers Under the U.S. Corporate Tax Code,” The New York Times Online, January 27, 2011; Binyamin Appelbaum, “Corporate Taxes: More Winners and Losers,” The New York Times Online, January 27, 2011; “Analysis: 12 Corporations Pay Effective Tax Rate of Negative 1.5% on $171 Billion in Profits: Reap $62.4 Billion in Tax Subsidies,” Citizens for Tax Justice, June 1, 2011, http://​www.​ctj.​org. 69 “Double Irish with a Dutch sandwich” Charles Duhigg and David Kocienieski, “How Apple Sidesteps Billions in Taxes,” The New York Times, April 29, 2012. 70 Paid only $3.3 billion in taxes on $34.2 billion in profits Ibid. 71 “Check the Box” Vanessa Houlder, Megan Murphy, and Jeff Gerth, “Tax Wars: The Accidental Billion-Dollar Break,” FT.​Com Financial Times, September 27, 2011. 72 They lobby Congress for a “tax holiday” David Kocieniewski, “Companies Push for Tax Break on Foreign Cash,” The New York Times, June 19, 2011; Linnley Browning, “A One-Time Tax Break Saved 843 U.S.


pages: 281 words: 71,242

World Without Mind: The Existential Threat of Big Tech by Franklin Foer

artificial general intelligence, back-to-the-land, Berlin Wall, big data - Walmart - Pop Tarts, big-box store, Buckminster Fuller, citizen journalism, Colonization of Mars, computer age, creative destruction, crowdsourcing, data is the new oil, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Douglas Engelbart, Edward Snowden, Electric Kool-Aid Acid Test, Elon Musk, Fall of the Berlin Wall, Filter Bubble, global village, Google Glasses, Haight Ashbury, hive mind, income inequality, intangible asset, Jeff Bezos, job automation, John Markoff, Kevin Kelly, knowledge economy, Law of Accelerating Returns, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, move fast and break things, move fast and break things, new economy, New Journalism, Norbert Wiener, offshore financial centre, PageRank, Peace of Westphalia, Peter Thiel, planetary scale, Ray Kurzweil, self-driving car, Silicon Valley, Singularitarianism, software is eating the world, Steve Jobs, Steven Levy, Stewart Brand, strong AI, supply-chain management, the medium is the message, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas L Friedman, Thorstein Veblen, Upton Sinclair, Vernor Vinge, Whole Earth Catalog, yellow journalism

As Amazon relocated, it drastically understated the value of the assets it shifted to Luxembourg. The whole plot has irked the IRS, which has built a careful case against Amazon. Calculations by the IRS show that Project Goldcrest helped Amazon to dodge a bill of at least $1.5 billion that would otherwise have been paid to the U.S. government. Google has the same sort of unpatriotic accounting schemes. It prefers maneuvers known as the Double Irish and the Dutch Sandwich. Google has also shifted assets to Bermuda, that famous mecca of high tech. By the end of 2015, it had “permanently reinvested” $58.3 billion of its profits in foreign tax havens, earnings on which it pays no U.S. tax. The tech companies maintain every shred of data, yet seem to want to purge every bit of taxable earnings. The year Facebook went public, it recorded $1.1 billion in American profits, but didn’t pay a cent of federal or state income tax.


pages: 398 words: 105,917

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks

accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks

So did Charlie McCreevy, Ireland’s finance minister from 1997 to 2003, as the country sucked in the big US tech companies: ‘I used to use him to get advice on technical tax issues and he’d give that advice freely.’31 The outcome is that, for over a decade, the major US tech companies like Google and Facebook have been selling products outside their home country through Irish companies that earn huge incomes but make minimal taxable profits. They manage this by paying royalties for using the genius behind their products to other Irish companies that own the relevant patents and know-how and claim to be tax-resident somewhere like Bermuda or the Caymans. The money usually flows through a Dutch company to avoid a ‘withholding tax’ on payments directly to a recognized tax haven. This is the infamous ‘Double Irish’ (with ‘Dutch sandwich’) scheme. It relies on multiple flaws in tax law of the sort that other countries have long corrected but with which Ireland determinedly persists. As Drucker discovered, with pressure on the Dutch government to stop functioning as a tax-avoidance conduit, in 2010 O’Rourke successfully lobbied for withholding taxes on royalties paid out of Ireland to be scrapped altogether. Google, to pick one of O’Rourke’s clients, thus pays a tax rate worldwide of around 17%, not much more than half the average of the rates where it really makes its money.32 By 2013, largely thanks to these offshore structures, the average tax rate paid by US corporations had fallen to 20% (compared to 30% fifteen years earlier, when headline US rates were no higher).33 When a UK parliamentary committee looked at Google’s dismal corporate tax payments in its second largest market – a total of $16m for five years up to 2011 despite UK sales of $18bn, thanks to the Irish structure – it concluded: ‘The big accountancy firms sell tax advice which promotes artificial tax structures . . . which serve to avoid UK taxes rather than to reflect the substance of the way business is actually conducted.’34 The bean counters were twisting the world tax system and everybody else was paying the price.

., 73, 277 PricewaterhouseCoopers (PwC), 143 and Sarbanes–Oxley Act (2002), 122 Connolly, John, 89–90, 136, 137, 139, 146, 148, 150, 201 Conservative Party, 95, 185, 186 consultancy, 6, 10–12, 69, 70–83, 97, 114, 183–210, 261–7, 284–5 Continental Baking, 59 Continental Bank, 101 convergence, 123 Cook, Martin, 16 ‘cooking the books’, 36 Cooper, Cynthia, 109 Cooper, William and Arthur, 49 Coopers & Lybrand, 49, 56, 65, 87–8, 95, 185, 216 Coopers Brothers, 87 Copeland, James, 239 Corbyn, Jeremy, 201 Cornwall, England, 43 corruption, 211–32, 240 cost accounting, 42–4, 70–71, 76 cost–profit calculus, 3 Cotswolds, England, 26 Countrywide Financial Corporation, 48, 118, 257 Court of Appeal, 211 credit default swaps (CDSs), 120, 122, 134–5 credit rating agencies, 130, 149 Cruickshank, David, 166 Crystal Park, Luxembourg, 170 Cuba, 239 Cuomo, Andrew, 133 currency swaps, 156–7 cyber-security, 272–3 Daily Mirror, 88 Daniel, Vincent, 112–13 Dante, 33 Dassler, Horst, 220 Datini, Francesco di Marco, 25 Davey, Horace, Baron Davey, 52 Davos, see World Economic Forum Defoe, Daniel, 38 DeLany, Clarence Martin, 72 Delaware, United States, 8, 57, 92, 236, 284 Deloitte, 2, 5, 8, 12–13, 82, 90, 98, 276, 277 and Adelphia, 109 and bankers’ bonuses, 158 and Bankia, 241 in Brazil, 242–3 Brexit memo (2017), 195, 203 charity, 16–17 in China, 244, 251–2 client relationship partners, 12–13 cyber-security, 272 and Deutsche Bank, 158 dot after name, 12 and Duke Energy, 109 and Financial Crisis Inquiry Commission, 145 Global Impact Report, 17 global operations, 236 and Gol, 242–3 government, advice to, 187, 189, 190, 191, 193, 194 and GPT, 216 and Hong Kong protests (2014), 251–2 and House of Lords committee (2010), 146 integrated reporting, 18 Journey Declaration, 275 and National Health Service (NHS), 193, 194 and Parmalat, 239, 243 and private finance initiative (PFI), 187, 189, 190, 191, 203 and Public Company Accounting Oversight Board (PCAOB), 145 revolving door, 207, 208 and Royal Ahold, 238–9 and Royal Bank of Scotland, 47, 90, 136–40, 142, 147, 241, 259 and securitization, 121 and Standard Chartered Bank, 230 and tax avoidance, 157, 158, 166, 203 and technology, 271 and thrifts, 87 and World Economic Forum, 18 Deloitte, Haskins & Sells, 89 Deloitte, William Welch, 46–7, 49, 158 Deloitte & Touche, 89, 91, 136–40 Deloitte Touche Tohmatsu, 239 Deltour, Antoine, 166–8, 171, 173–4, 175, 175 Democratic Party, 58, 80, 159 Deng Xiaoping, 243 Department for Business, UK, 201 Department for Exiting the EU, 204 Department of Health, UK, 188, 191, 192 Department of Justice, US, 144, 161, 223 deregulation, 84, 85, 95, 112, 163, 273–4 derivatives, 117, 119–23, 125, 129–31, 133–40, 148, 265 Desmond, Dermot, 163 Deutsche Bank, 158, 166, 258 Deutsche Treuhand-Gesellschaft, 235 Devon, England, 73 Dickinson, Arthur, 55, 62, 73, 82 DiPiazza, Sam, 242 dirty pooling, 63 discrezione, 26, 29 Disney, 171 Dissenters, 43 dividends, 31, 39, 45 Donovan, John, 116–17 Doty, James, 260 ‘Double Irish’ scheme, 164 double-entry bookkeeping, 3–4, 6, 18, 22–41, 42–4, 96 Bank of England, 38 and Catholicism, 24–5, 26, 29, 34 Christoffels, 36 East India Company, 37 Goethe, 235 Japan, 235 Medicis, 26–32, 36 Pacioli, 32–6, 100, 124 and Protestantism, 42 Royal African Company, 37 South Sea Company, 39–41, 42 Washington, 53 Watt, 42–3, 44 Wedgwood, 43, 44 Dow Jones, 5, 95 Drucker, Jesse, 164, 165 drug trafficking, 229, 231 Dublin, Ireland, 163 Duke Energy, 109 Duncan, David, 103–4, 105, 106, 107, 108 Duranton International Ltd, 214 EADS, 216 East India Company, 37 Economist, The, 67, 238 EDF (Électricité de France), 205 Edinburgh, Scotland, 54 Edinburgh Society of Accountants, 47 Edison, Thomas, 55 Edward IV, king of England, 30 Edward VII, king of the United Kingdom, 68 Egypt, 21 Einzelunterschrift, 221 Eisenhower, Dwight, 76 Eisman, Steve, 112 Electronic Data Systems, 82 Elizabeth II, queen of the United Kingdom, 111–12 Elkind, Peter, 101 Ellis, Kevin, 256, 258 Enfield rifles, 71 England Bank of England, 38 East India Company, 37 Royal African Company, 37 slave trade, 37 Wars of the Roses (1455–1487), 30 woollen industry, 26, 30 see also United Kingdom Ennis, Jessica, 196 Enron, 16, 40, 99–108, 110, 130, 186, 190, 209, 221, 240, 261, 264 and Arthur Andersen & Co., 4, 7, 11, 74, 102–8, 113, 117 and consultancy arms, sale of, 262 and mark-to-market, 99–102, 113 and regulation, 6, 10, 122, 162, 222, 274, 279 Ernst & Ernst, 63, 71, 87 Ernst & Whinney, 86, 87 Ernst & Young, 2, 56, 91, 97, 132–3, 148–9 alumni system, 17 and Anglo Irish Bank, 144 Arthur Andersen structured finance purchase (2002), 121 ‘Building a Better Working World’, 12 and Civil Service Awards, 200 and Financial Crisis Inquiry Commission, 145 global operations, 236 government, advice to, 180, 187, 199, 202 and HealthSouth, 109 and Hong Kong protests (2014), 251–2 integrated reporting, 18 in Japan, 240–41 and Lehman Brothers, 12, 13, 132–3, 145, 148–9 and limited liability partnerships, 94, 95 and Lincoln Savings and Loan, 86–7 mark-to-model, 124 Panama Papers scandal (2016), 247 and private finance initiative (PFI), 187 and Public Company Accounting Oversight Board (PCAOB), 144–5 ‘Quality in Everything We Do’, 12 revolving door, 206, 207, 208 and securitization, 121 and Sino-Forest, 244 Tate sponsorship, 16 and tax avoidance, 7, 156–7, 162, 180, 182, 246, 247 tax policy development team, 180, 199 thought leadership, 12 and VAT avoidance, 7 and Warner, 224 Weinberger’s leadership, 17–18 and World Economic Forum, 17 European Central Bank, 10 European Commission, 170, 253–5, 268, 280 European Union (EU), 168, 170, 203, 253–5 eurozone, 273 Evans, Jonathan, 207 Evening Standard, 256 Everson, Mark, 159 executive pay, 76 ‘expectations gap’, 65, 257 ‘Eye of the Tiger’ (Survivor), 103 Facebook, 164 fair value, 123–5, 126 Fairhead, Rona, 230 Faisaliah Tower, Riyadh, 217 Falcon 900 jets, 100–101 Farah, Mohamed ‘Mo’, 196 Farrar, Michael, 208 Fastow, Andrew, 101–3, 104–5, 108, 109 Federal National Mortgage Association (‘Fannie Mae’), 118–19, 145, 257 Federal Reserve, 122, 133 Federal Trade Commission, 79 Fiat, 170 Fibonacci, Leonardo, 21–2, 32 FIFA (Fédération Internationale de Football Association), 219–28 Fife, Scotland, 48 Financial Conduct Authority, 140, 149, 281 financial crisis (2007–8), x, 4, 7, 10, 13–14, 18, 111–50, 210, 253, 256–9, 265 American International Group bailout, 133–5, 144, 145, 148 Anglo Irish Bank bailout, 144 Bear Stearns bailout, 139, 145 and China, 111 Fannie Mae crisis, 118–19, 145, 257 HBOS bailout, x, 140–41, 142–3, 149, 257 Lehman Brothers collapse, 12, 13, 92, 131–3, 138, 144, 145, 148–9 and IAS39 rules, 123–5, 126, 127, 147 and mark-to-market, 129–31 New Century Financial Corporation collapse, 115–18, 257 Northern Rock collapse, 125–9, 142–3, 148 Royal Bank of Scotland bailout, 47, 136–40, 142, 241 and securitization, 119–23, 129–31, 133–40, 265 and subprime mortgages, x, 10, 36, 48, 111–22, 126, 130, 133, 136, 142, 274 Washington Mutual collapse, 145 Financial Crisis Inquiry Commission, 134, 135, 144, 145 Financial Reporting Council, 138, 142, 144, 149, 182, 209–10, 213–14, 259, 261 Financial Services Authority, 127, 128, 137, 138, 140 Financial Times, 17, 94, 169, 275 Finland, 246 First World War (1914–18), 71 Flint, Douglas, 229 FLIP (Foreign Leveraged Investment Program), 159, 162, 181 Florence, Republic of (1115–1532), 16, 21, 25, 26–32 Flynn, Timothy, 149 Ford, 71, 181 Ford, Henry, 71 Fortune, 62 fossil fuels, 18 Foul!


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, longitudinal study, mass incarceration, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, zero-sum game

In the state anti-trust suits against Microsoft, almost all states settled before trial. Laws can have loopholes. This can happen by accident, when laws are linguistically ambiguous, contain simple errors, or fail to anticipate some new technological development. It can also happen deliberately, when laws are miswritten to enable the skillful few to evade them. Examples of accidental loopholes are the “Double Irish” and “Dutch Sandwich” loopholes that allow multinational corporations to avoid U.S.—and other—taxes.14 It's how Google pays only 2.8% of profits in tax. One estimate claims the U.S. loses $60 billion per year in taxes this way. Another loophole allows large paper mills to claim $6 billion in tax credits per year for mixing diesel fuel in with a wood byproduct they already burn; the law with the loophole was intended to reduce the consumption of fossil fuels.15 A variety of loopholes make video games one of the most highly subsidized industries in the U.S.

And, as we've seen in Chapter 12, the person who is in charge of making this decision will do better personally if he ignores his own moral considerations and cooperates with his employer. Even worse, if the corporation doesn't maximize profits, it risks a shareholder lawsuit. Additionally, market competition encourages sellers to ignore moral pressure as much as they can. Imagine if you were in a corporate boardroom, discussing the Double Irish tax loophole and how it could save your company millions. After it has been explained how the maneuver is perfectly legal, and how other companies are doing it, how far do you think a “but it's immoral” argument is going to go? Even if you don't want to do it, if you don't and your competitors do, you'll be uncompetitive in the marketplace—reminiscent of the sports doping example from Chapter 10.

Gary Becker Gary Becker (1996), “The Economic Way of Looking at Human Behavior: The Nobel Lecture,” Journal of Political Economy, 101:385–409. increasing the probability Mark Kleinman (2009), When Brute Force Fails: How to Have Less Crime and Less Punishment, Princeton University Press. conflicting evidence Nina Mazar and Dan Ariely (2006), “Dishonesty in Everyday Life and Its Policy Implications,” Journal of Public Policy & Marketing, 25:117–26. two Irish subsidiaries Joseph B. Darby III and Kelsey Lemaster (15 May 2007), “Double Irish More than Doubles the Tax Savings,” Practical US/International Tax Strategies, 11:2,11–16. bigger one opened up Todd Neeley (28 Mar 2011), “Pulp, Paper Companies Amend Tax Returns Actions Could Cost Taxpayers Billions of Dollars,” DTN: The Progressive Farmer. Chapter 10 someone was sentenced Barbara de Lollis (15 Sep 2010), “Woman Faces Three Months in Jail for Stealing Hotel Towels,” USA Today.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism

There is a reason most people no longer accept that sort of sovereignty.”93 One test for how effective the U.S. government can be in regulating the digital giants will be the matter of taxation.94 Because of the fluid nature of the digital economy, Internet firms have been able to take advantage of the federal income tax code, devised for brick-and-mortar businesses, to move a disproportionate amount of their profits earned in the United States to accounts in foreign low-tax nations and dramatically reduce what they pay in taxes overall, in particular to the U.S. government. Nicholas Shaxson describes aspects of the process in his 2011 book, Treasure Islands: In October 2010 a Bloomberg reporter explained how Google Inc. cut its taxes by $3.1 billion in the previous three years through transfer pricing games known by names such as the “Double Irish” and the “Dutch Sandwich,” ending up with an overseas tax rate of 2.4 percent. The problem is getting worse. Microsoft’s tax bill has been falling sharply, for similar reasons. Cisco is at it. They are all at it. Transfer pricing alone costs the United States an estimated $60 billion a year—and that is just one form of the offshore tax game.95 Apple, for example, has pioneered sophisticated accounting techniques that—although probably technically legal—are extraordinarily damaging to U.S. tax revenues.


pages: 667 words: 149,811

Economic Dignity by Gene Sperling

active measures, Affordable Care Act / Obamacare, autonomous vehicles, basic income, Bernie Sanders, Cass Sunstein, collective bargaining, corporate governance, David Brooks, desegregation, Detroit bankruptcy, Donald Trump, Double Irish / Dutch Sandwich, Elon Musk, employer provided health coverage, Erik Brynjolfsson, Ferguson, Missouri, full employment, gender pay gap, ghettoisation, gig economy, Gini coefficient, guest worker program, Gunnar Myrdal, housing crisis, income inequality, invisible hand, job automation, job satisfaction, labor-force participation, late fees, liberal world order, longitudinal study, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass incarceration, mental accounting, meta analysis, meta-analysis, minimum wage unemployment, obamacare, offshore financial centre, payday loans, price discrimination, profit motive, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, secular stagnation, shareholder value, Silicon Valley, single-payer health, speech recognition, The Chicago School, The Future of Employment, The Wealth of Nations by Adam Smith, Toyota Production System, traffic fines, Triangle Shirtwaist Factory, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, working poor, young professional, zero-sum game

Yet countries like Ireland, the Netherlands, Bermuda, the Cayman Islands, and numerous others participate in the world’s greatest race-to-the-bottom competition with extremely low or nonexistent corporate taxation to attract corporate profits. These tax havens effectively put intense pressure on every other nation to cycle down their corporate tax rates or risk firms artificially shifting their profits to avoid paying taxes by using convoluted techniques with names like the “Double Irish with a Dutch Sandwich.” In 2015, 45 percent of the profits of multinational corporations based in the United States and other advanced economies were put on the books in tax havens. To be clear, the underlying economic activity generating those profits did not take place in the tax havens—it took place in the United States and other countries, using those countries’ advanced infrastructure, educated workforces, and legal systems that were paid for by those domestic taxpayers.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

In 2010 and 2011, technology firms in the Standard & Poor’s 500 stock index reported an average global tax rate one-third less than the rest of the S&P according to a New York Times study.37 Apple had a tax rate of only 9.8 percent in 2011, saving some $2.4 billion in taxes, according to estimates by Martin Sullivan; it sloshed profits around the globe using tactics with names like the Double Irish with a Dutch Sandwich.38 A favorite haven is Luxembourg, where servicing tax dodgers accounts for up to one-half its national income.39 The profit on your Apple music or app downloads, for example, is recorded at a mail drop called iTunes S.àr.l. in Luxembourg. Oh, and that Apple product you bought in Berlin? You likely purchased it through a reluctant German commissionaire, a cutout for a firm in low-tax Singapore, where the profits of the German transaction are actually recorded.40 The example of Google is also instructive.


pages: 301 words: 88,082

The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks

accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing

For 2010 the group reported annual revenues of $60bn, profits of around $25bn and a worldwide tax bill of $6.2bn which, at 25%, was dramatically lower than the headline US federal rate of 35% and represented a good couple of billion pounds a year in tax saved.‌18 There are plenty of other huge American corporations minimizing contributions to national governments at the time of their greatest need. Not only do British advertisers pay a low-taxed Dublin company for getting their name up first on Google searches but this company itself pays royalties for using the Google name to an Irish-registered but Bermuda-tax resident company.‌19 The payments go via a Dutch company interposed between these two companies in a ‘Dutch sandwich’ arrangement so that the money can leave Ireland tax free under the country’s tax treaty with the Netherlands, which then allows its onward tax-free transmission to the Atlantic tax haven. The effect is that, courtesy of none-too-demanding Irish corporate tax laws and generous international agreements, companies can dodge even Ireland’s low tax rate if they’re greedy enough. Other users of the technique, including Facebook, Apple, Oracle and Pfizer, certainly are.


pages: 339 words: 95,270

Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein

Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, collective bargaining, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, deglobalization, deindustrialization, Deng Xiaoping, Donald Trump, Double Irish / Dutch Sandwich, Fall of the Berlin Wall, falling living standards, financial innovation, financial repression, fixed income, full employment, George Akerlof, global supply chain, global value chain, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, money market fund, mortgage debt, New Urbanism, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck

Eurostat, “NUTS3 GDP per Capita (Euros per Inhabitant) for Southwestern Ireland,” https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=reg_area3&lang=en; Charlie Taylor, “Apple’s Secretive Cork Facility Opens Up—To an Extent,” Irish Times, January 11, 2018. 37. Kari Jahnsen and Kyle Pomerleau, “Corporate Income Tax Rates around the World, 2017,” Tax Foundation, Fiscal Fact No. 559, September 7, 2017; Robert W. Wood, “How Google Saved $3.6 Billion Taxes from Paper ‘Dutch Sandwich,’” Forbes, December 22, 2016. 38. Based on calculations from BEA data on direct investment and multinational enterprises, https://www.bea.gov/iTable/index_MNC.cfm; see also Matthew C. Klein, “What the Foreign Direct Investment Data Tell Us about Corporate Tax Avoidance,” Financial Times, November 23, 2017; and Gabriel Zucman, The Hidden Wealth of Nations (Chicago: University of Chicago Press, 2015). 39.


pages: 579 words: 160,351

Breaking News: The Remaking of Journalism and Why It Matters Now by Alan Rusbridger

accounting loophole / creative accounting, Airbnb, banking crisis, Bernie Sanders, Boris Johnson, centre right, Chelsea Manning, citizen journalism, cross-subsidies, crowdsourcing, David Attenborough, David Brooks, death of newspapers, Donald Trump, Doomsday Book, Double Irish / Dutch Sandwich, Downton Abbey, Edward Snowden, Etonian, Filter Bubble, forensic accounting, Frank Gehry, future of journalism, G4S, high net worth, invention of movable type, invention of the printing press, Jeff Bezos, jimmy wales, Julian Assange, Mark Zuckerberg, Menlo Park, natural language processing, New Journalism, offshore financial centre, oil shale / tar sands, open borders, packet switching, Panopticon Jeremy Bentham, pre–internet, ransomware, recommendation engine, Ruby on Rails, sexual politics, Silicon Valley, Skype, Snapchat, social web, Socratic dialogue, sovereign wealth fund, speech recognition, Steve Jobs, The Wisdom of Crowds, Tim Cook: Apple, traveling salesman, upwardly mobile, WikiLeaks

* I had – as a result of the Tesco action – spent many, many hours looking into corporate tax avoidance and realised how widespread and commonplace the use of complex and artificial tax avoidance structures had become. So, instead of tip-toeing away from the whole subject, we resolved to launch a major series looking at more than 20 prominent British companies whose aggressive tax arrangements looked questionable. We looked at, and tried to explain in simple terms, the so-called ‘double Luxembourg’, the ‘Irish branches’ and the ‘Dutch sandwich’. Seldom, if ever, had this world previously been exposed to such prolonged and extensive scrutiny. Newspapers are supposed to hold the powerful to account. But what if the powerful are not politicians – a relatively easy target – but advertisers? When newspapers had strong balance sheets that question should have been easy to answer. But in a world where advertising directors were finding it harder and harder to make their revenues, what were the dangers of ‘compromise’?


pages: 356 words: 112,271

Brexit and Ireland: The Dangers, the Opportunities, and the Inside Story of the Irish Response by Tony Connelly

air freight, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, call centre, centre right, Double Irish / Dutch Sandwich, eurozone crisis, Fall of the Berlin Wall, knowledge economy, LNG terminal, low skilled workers, non-tariff barriers, open borders, personalized medicine, race to the bottom, regulatory arbitrage, éminence grise

The New Zealand Grudge Match Any external observer of the recent economic history of Ireland could not have avoided a particular narrative: the economic boom had come about because Ireland was an open, flexible, skilled, low-tax, English-speaking economy right at the gates of the single market, prolific at securing hi-tech, highly skilled, world-beating multinationals. They had fuelled the boom, and the recovery. But the sector that would come to dominate the Brexit debate had nothing to do with Big Tech or Big Pharma or the Double Irish. That sector was food. The food produced in Ireland, whether animal or vegetable, by-product or finished product, will go to the very heart of how the nation will cope with, or recover from, Brexit. Food – whether living, free-range, slaughtered, processed, powdered, mass-produced into individually wrapped slices, converted into microwaveable dinners, scooped up from the sea, frozen and shipped to tables around the planet – will be at the centre of the worst problems Ireland faces when Britain formally leaves and works out its new relationship with the EU.


pages: 385 words: 121,550

Three Years in Hell: The Brexit Chronicles by Fintan O'Toole

airport security, banking crisis, Berlin Wall, blockchain, Bob Geldof, Boris Johnson, British Empire, centre right, cognitive dissonance, congestion charging, deindustrialization, deliberate practice, Dominic Cummings, Donald Trump, Double Irish / Dutch Sandwich, Downton Abbey, Etonian, eurozone crisis, facts on the ground, Fall of the Berlin Wall, first-past-the-post, full employment, income inequality, l'esprit de l'escalier, labour mobility, late capitalism, open borders, Slavoj Žižek, South China Sea, technoutopianism, zero-sum game

… There thou mightst behold the great image of authority.’ The great image of British authority this week was Theresa May travelling to Brussels on Monday essentially as a beggar, a supplicant desperately in need of the European declaration of ‘sufficient progress’ in the Brexit talks – and the bark of Arlene Foster peremptorily ordering the British prime minister to take back the promises she had made. Theresa May was experiencing the double Irish, capitulating first to the Irish government and then uncapitulating on the orders of a very different Irish force, the Democratic Unionist Party. And then, in the early hours of Friday morning, there was a further twist – both May and the DUP essentially signing up to what had been agreed on Monday. It was a startling display of British powerlessness: there can hardly be a more unfortunate military manoeuvre than the retreat from a retreat.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

However, while “tax avoidance” 334 Termites of the State exploits existing loopholes in the tax legislations of countries and relies on favorable interpretations of ambiguous rules, and is thus not clearly illegal and punishable, tax evasion breaks some tax rules and is thus punishable. Large enterprises, such as Apple and Starbucks, that have paid little taxes on enormous world profits have argued, with some justification, that they have been following existing laws and have not been evading taxes. The problem is the tax laws and not their behavior. Expressions such as “inversion,” “transfer prices,” “patent boxes,” “thin capitalization,” and “double Irish” have entered the lexicon of media reporting. They reflect tax avoidance strategies used by corporations. Similar examples could be provided from several areas of the financial market or from other sectors. Once again it must be remarked that those who benefit from these interpretations are not the average workers, and that these strategies end up affecting Gini coefficients and equity. Because of their number, their complexity, and the way in which they are now written (often requiring thousands of pages), many laws and regulations lend themselves to different interpretations by clever lawyers and accountants.