The Double Irish and Dutch Sandwich tax strategies: Could a general anti-avoidance rule counteract the problems caused by the utilisation of these structures?

Abstract

This paper analyses the Double Irish and Dutch Sandwich tax structures used by large multinational enterprises. These structures enable companies to shift significant profits to offshore tax havens through the use of wholly owned subsidiaries in Ireland and the Netherlands. Application of the New Zealand General Anti-Avoidance rule in s BG 1 of the Income Tax Act 2007 reveals that any attempt to counteract these structures would be highly fact dependent. The paper concludes that it would be possible to apply the rule, but that there would be practical difficulties in relation to enforceability of the Commissioner’s ruling. A similar result was reached when applying the United States General Anti-Avoidance rule. The attempted application of the General Anti-Avoidance rules reveals a fundamental flaw in the income tax system. That is, the inability of the current system to regulate and control intangible resources and technology based transactions.