WTF of the Week: The "Double Irish" and "Dutch Sandwich"

No, "Double Irish" does not mean two leprechauns. It is actually much more terrifying.

Why do lawmakers keep claiming we're broke when corporate profits margins are at an 18-year high?

It might have something to do with the billions in revenue lost when multinational corporations use offshore tax havens to get around paying their fair share to the U.S. government. From NPR:

On today's Fresh Air, Bloomberg News reporter Jesse Drucker, who has written extensively about corporate tax-dodging, explains how companies like Google, Pfizer, Lilly, Oracle, Facebook and Microsoft have managed to reduce their tax rates by hundreds of millions — and in some cases, billions — of dollars by taking advantage of offshore tax havens. 

In October, Drucker reported that Google had saved $3.1 billion in taxes in the past three years by shifting the majority of its foreign profits into accounts in Ireland, the Netherlands and Bermuda using financial techniques called "the Dutch Sandwich" and "the Double Irish" arrangement. Basically, he says, Google credited its Irish office with the majority of its non-U.S. sales revenue — and then shuttled that money through various subsidiaries located in Ireland and other countries to save billions in taxes.

 So how do these financial techniques work? Jesse Drucker explains Google's approach in Bloomberg:

When a company in Europe, the Middle East or Africa purchases a search ad through Google, it sends the money to Google Ireland. The Irish government taxes corporate profits at 12.5 percent, but Google mostly escapes that tax because its earnings don't stay in the Dublin office, which reported a pretax profit of less than 1 percent of revenues in 2008.

Irish law makes it difficult for Google to send the money directly to Bermuda without incurring a large tax hit, so the payment makes a brief detour through the Netherlands, since Ireland doesn't tax certain payments to companies in other European Union states. Once the money is in the Netherlands, Google can take advantage of generous Dutch tax laws. Its subsidiary there, Google Netherlands Holdings, is just a shell (it has no employees) and passes on about 99.8 percent of what it collects to Bermuda. (The subsidiary managed in Bermuda is technically an Irish company, hence the "Double Irish" nickname.)

These practices are perfectly legal; however, they raise serious ethical questions. How can lawmakers justify the proposed $6 billion in federal cuts when these profit-shifting techniques cost us $60 to $90 billion in revenue every year?

If it wasn't already clear, suppressing stories like this one is the real motivation behind the GOP's effort to defund NPR.