In late 2023, the Internal Revenue Service (IRS) scored a crucial win against corporate tax avoidance when a Colorado federal judge upheld the agency’s challenge to a $2.4 billion tax deduction claimed by Liberty Global, a multinational telecommunications firm. The case centered on “Project Soy,” a sophisticated offshore tax maneuver that shuffled assets among Liberty Global’s companies in Belgium, the Netherlands, and Slovakia. It exploited a loophole in the 2017 Tax Cuts and Jobs Act (TCJA) under the Trump administration. While this ruling marked a significant victory for the IRS, little attention has been paid to the role of Deloitte, one of the Big Four accounting firms, in crafting the strategy. This raises serious questions about how widespread the use of this loophole might have been, and whether other corporations may have benefitted from similar tax schemes.
According to court filings, Liberty Global’s Project Soy relied on a complex system of transactions between subsidiaries across multiple countries to generate an enormous tax write-off. The IRS claimed that the entire purpose of the maneuver was to avoid paying billions in US taxes, and described it as a violation of the “economic substance doctrine,” a law intended to prevent tax shelters.
The role of Deloitte in designing this maneuver has been scrutinized, with US authorities suggesting that the firm played a key part in conceptualizing and structuring the tax strategy. While Liberty Global has denied that Deloitte originally pitched the loophole to them, court documents reveal that the firm was deeply involved in the execution of Project Soy, participating in key meetings and helping to finalize the plan. The Justice Department has noted that Liberty Global provided little documentation regarding its initial discussions with Deloitte, and key correspondences were withheld,........