Real-World Examples of Corporate Tax Avoidance
To understand how these strategies play out, consider a few prominent multinational corporations (excluding their external advisors) that have been spotlighted for their tax practices:
- Apple (United States/Ireland): Apple Inc., the tech giant, became a poster child for aggressive tax avoidance when it routed a huge portion of its international profits through Irish subsidiaries with special arrangements. For years, Apple’s Irish affiliates claimed they were not tax resident in any country, allowing Apple to effectively pay almost no tax on tens of billions in profit. In fact, one Apple subsidiary was found to have an effective tax rate of about 0.005% in a given year – essentially nil. This came to light through investigations by the U.S. Senate and the European Commission. In 2016, EU regulators concluded that Ireland had granted Apple an unlawful tax deal, and ordered Apple to pay roughly €13 billion (about $15 billion) in back taxes. (After lengthy appeals, in 2024 Apple was finally compelled to pay that sum into an escrow account.) Apple insists it followed all laws, but the case became a landmark in the fight against avoidance, highlighting how a multinational could exploit mismatches between U.S. and Irish tax rules to make massive profits virtually untaxed.
- Google (United States/Ireland & Bermuda): Google – now under the parent company Alphabet – likewise structured its operations to drastically lower its taxes on overseas earnings. Google employed the notorious “Double Irish, Dutch Sandwich” scheme to funnel profits from its European sales to tax havens. The company’s Dublin-based subsidiary first collected revenues from across Europe, then Google had it pay large royalties to a Dutch subsidiary (exploiting an EU rule that let money move to the Netherlands tax-free). The Dutch entity would then forward that money to an affiliate in Bermuda (via another Irish entity), where corporate income tax is zero. Through this convoluted pipeline, Google managed to attribute a huge share of its global profits to Bermuda – escaping taxation in the countries where those profits were actually earned. At one point, Google’s effective tax rate on non-U.S. profits dropped into the single digits. Under pressure from European authorities and after Ireland moved to close the “Double Irish” loophole, Google phased out this scheme by 2019. Nonetheless, for years it allowed the company to avoid billions in taxes, and it became Exhibit A in debates on taxing digital giants.
- Starbucks (United States/United Kingdom & Netherlands): The coffeehouse chain Starbucks faced intense backlash in the United Kingdom when it was revealed around 2012 that the company had paid virtually no UK corporate tax over the previous decade, despite large sales. Starbucks achieved this by reporting losses or minimal profits in Britain, even as its cafes thrived. The UK subsidiary accomplished that low profit on paper by paying substantial royalty fees to a Dutch Starbucks affiliate for the use of trademarks and recipes, and buying its coffee beans at inflated prices from another Starbucks subsidiary in Switzerland. Those internal payments siphoned revenue out of the UK into jurisdictions where Starbucks had arranged for a lighter tax hit. While all these transactions were legal, the British public and lawmakers were enraged to learn that a household-name business was contributing almost nothing to the national treasury. Protesters boycotted Starbucks stores, and Parliament hauled in company executives for questioning. In response to the public pressure, Starbucks eventually volunteered to pay £20 million in additional UK taxes and even relocated its European headquarters from the Netherlands to London. This episode underscored how tax avoidance can become a major reputational risk.
- Amazon (United States/Luxembourg): E-commerce giant Amazon has been repeatedly scrutinized for its low tax payments in many countries. A key reason is that Amazon for years channeled its European sales through a subsidiary in Luxembourg, a small EU country known for favorable tax rulings. When a customer in Germany or Italy bought something on Amazon, the sale was technically booked by “Amazon EU Sarl” in Luxembourg, rather than by a local branch. By concentrating profits in Luxembourg – sometimes under sweetheart deals that reduced taxes there – Amazon minimized its tax in the larger European economies where the sales took place. In 2017, the European Commission found that Luxembourg had granted Amazon an illegal tax advantage, ordering it to pay about €250 million in back taxes. (Amazon appealed, and a court later overturned that order on procedural grounds, reflecting how legally contentious these cases can be.) Under growing pressure, Amazon has adjusted some practices, such as reporting more revenue locally in countries like the UK and France. However, its overall tax rate remains extremely low relative to its enormous revenues, making Amazon a prime example in debates about fair taxation of digital and retail multinationals.
- Pfizer and the Allergan Inversion (United States/Ireland): One of the most dramatic attempted tax maneuvers was pharmaceutical giant Pfizer’s planned inversion with Irish-based Allergan in 2016. Pfizer – a storied American company – sought to merge with Allergan and re-incorporate the combined business in Ireland, thereby lowering its tax rate substantially. Ireland’s corporate tax rate of 12.5% was far below the U.S. rate at the time, and Pfizer also had tens of billions in profits overseas that it could potentially access more freely after becoming an “Irish” company. The $160 billion deal would have been one of the largest inversions ever. It sparked immediate political backlash; U.S. leaders argued Pfizer was trying to escape its tax responsibilities after benefiting from the U.S. market and government-supported research. In a high-profile move, the U.S. Treasury swiftly tightened its anti-inversion rules – essentially targeting the specific features of the Pfizer-Allergan deal – and made the merger far less attractive. Pfizer ultimately abandoned the plan. The episode served as a turning point, effectively putting an end to the inversion trend among major U.S. corporations, and reinforcing the message that some tax-driven strategies could be deemed beyond the pale.