Thursday, February 27, 2020

#TheDress and International Taxes


Yesterday was the five-year anniversary of #TheDress, one of the most fascinating and confounding Internet memes of the past decade. At the time, I saw a remarkable parallel to an international tax policy issue , and considered writing a blog post comparing the two. I wrote it out, but decided not to submit it to my editors—and I’ve regretted it ever since. Here it is, with minimal edits and an update at the end.

March 1, 2015

Unless you spent this weekend away from your computer, your TV, and your phone, you probably heard about “The Dress”—or as it became known on social media, #TheDress. The garment, pictured above, seemed ordinary enough, until people started to describe it. Some people said it was gold and white, others said it was black and blue, and neither group could figure out what in the world the other was talking about. Tens of millions of people on every continent spent Thursday night arguing about it, and it lasted throughout the weekend.

(I can’t see anything other than gold and white. Believe me, I tried.)

The answer, it turns out, wasn’t some social delusion, sorcery, or a mass outbreak of color-blindness. It didn’t even really have to do with eyesight or color. Experts suspect it is due to slight variations in neurology creating differences in how people interpreted the images, color, and light in the picture lead to very different conclusions about what was being depicted.

There’s a similar dynamic which sometimes occurs when governments look at complex corporate tax structures. Due to differences in laws and customs—often slight—tax authorities can come to quite different conclusions about what a structure is, and how it should be taxed. And while #TheDress just resulted in a few moments of amusing online diversion, when it comes to international taxation this phenomenon can cause a serious problem.