TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, February 4, 2014

IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide

IBM 2Bloomberg:  IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide, by Jesse Drucker:

IBM has reduced its tax rate to a two-decade low with help from a tax strategy that sends profits through a Dutch subsidiary. The approach, which involves routing almost all sales in Europe, the Middle East, Africa, Asia and some of the Americas through the Netherlands unit, helped IBM as it gradually reduced its tax rate over 20 years at the same time pretax income quadrupled. Then last year, the rate slid to the lowest level since at least 1994, lifting earnings above analysts’ estimates.  ...

Attracted by the Netherlands’ policies and extensive network of tax treaties, IBM joins companies such as Yahoo! Inc., Google Inc. and Cisco Systems Inc. that have used Dutch subsidiaries to cut taxes.

Offshore tax strategies like the one used by IBM are coming under increased scrutiny. In the past year, the tax-avoidance techniques of companies including Apple Inc., Google and Inc. have been the subject of U.S. Senate and U.K. Parliament hearings. Meanwhile, the Organization for Economic Cooperation and Development, a government-funded think tank, is developing a plan to fight so-called profit-shifting at the direction of the Group of 20 nations.

(Hat Tip: Bruce Bartlett.)

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