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Google Warns Irish Government Against Tax Increase
theodp writes "The Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country's controversial low corporate tax rate is raised in return for an IMF/EU bailout to shore up the country's beleaguered banking system. According to The Telegraph, a statement signed by senior execs at Microsoft, HP, Bank of America, Merrill Lynch, and Intel points out that although Ireland's tax rate may be low in European terms, it is not when compared with locations such as Singapore, India and China. Separately, the head of Google's 2,000-strong European HQ in Dublin told the Belfast Telegraph, 'anything that impinges on Ireland's competitiveness is going to be a big thing for Google,' adding, 'anything that increases the cost-base of a business is negative for competitiveness.'"
I haven't specifically found what I'm talking about, but some of the various problems can be found outlined, with citations, here: http://wakeupwalmart.com/facts/
Except they do contribute - indirectly. By exporting goods to other countries, those companies bring money into their host country, where they pay it out as wages, spend it on locally-purchased supplies, etc. The host country then has ample opportunity to obtain tax revenue via personal income, payroll, or consumption taxes.
Not in the Irish case. Companies "in Ireland for tax reasons" don't necessarily employ many people there. They just have to allocate certain revenues to an Irish subsidiary for tax purposes, and then re-"export" these same on-paper revenues to tax havens like Bermuda. The so called "Double Irish" and "Dutch Sandwich" (they use another holding company in Holland too) that meant Google paid only 2.4% tax rather less than Ireland's 12.5% to 25% rates. It doesn't depend on how many people you employ. Nor on actually making much in Ireland. Just on sharp practice to ensure that even the toilet cleaners at these countries pay higher rates of tax than the company does.
Don't be naive, companies don't pay taxes. It's an indirect tax on people. People are the only source of tax revenue.
If you raise corporate tax, they simply raise their prices and lower their operating costs in other ways. If they are unable to maintain their margin, they move the business somewhere else. Companies can move faster than labor can follow. The barrier to labor mobility is maintained by companies through their subtle manipulation of nationalism. Companies being able to move and labor not being able to follow, allows companies to keep playing the "we'll relocate your job right from under your ass" game.
Silly people (ie: most people, aka: "joe average", "john q. public", "unwashed masses", "chumps") buy the illusion that corporations actually pay tax. It allows politicians to pretend they're screwing someone other than the people. Corporations are only logical entities, not real ones.
Bottom line: the people *always* pay.
The reasoning for the money-from-nothing argument is this:
Bank opens. Alice deposits $1000. Bank loans Bob $250 of Alice's money. Alice still has $1000, Bob now has $250. As long as Alice never withdraws more than $750, the $250 the bank just created on paper still exists. When she tries to withdraw $751, the universe explodes. Luckily it's not just Alice, it's 10,000 Alices, and it's unlikely that they will all withdraw $751 at the same time, so the universe is safe. Sort of.
yup, it's called fractional reserve banking. For X units of currency on the books under 'loans', bank has to hold only n% of X to be considered legit.
That means that, assuming 10% of mandatory reserve, having 1 dollar in deposits allows for 10 dollars in loans. Nowadays the level of reserves around the world is much less than 10%, i'd even risk saying that it's less than 5%.
But that is just what they want you to think BadAnalogyGuy. Banks are FDIC insured with the main requirement being they keep 10% of deposits on hand. Example, if a postal worder deposits $1,000, then the bank can make me a loan of $900, correct? Not so fast...
What they do is take $100 of that money, and loan someone $1000. And then take another $100 and loan someone else $1,000, etc. They can loan out $10,000 on your $1,000 deposit. Now this too is a simplification, but you get the idea.
Now where did they money come from they loaned out? Why, "out of thin air" when they electronically deposited funds to the borrower's account. They need more cash on hand.. they call their "local" Federal Reserve bank and get their nice new crisp bills. Why, the Federal Reserve isn't even a government entity.. no more federal than say, Federal Express. Yet, we pay $0.60 on the dollar to them, for our government to print (borrow) money from them to pay the depositing postal worker.
Interested in more info, please see these links:
http://video.google.com/videoplay?docid=-8484911570371055528#
http://video.google.com/videoplay?docid=6507136891691870450#
On a side note (watch the first video), I live near Jekyll Island.
Like a city whose walls are broken down is a man who lacks self-control.
ITYM the US should slap Google with a huge tax bill for running a bunch of business through Ireland's 12.5% tax rate rather than the Us 35% corporate tax rate in the first place. They are based in the US, after all. Google shelters itself from US taxes using Ireland and shelters itself from Irish taxes in Bermuda. It's not speculation on my part. It's all very well documented. The sad part is that right now it's all perfectly legal to move money around internationally for the express purpose of lowering the taxes paid.
These arrangements allow Google, a US company, to put its sales of ads for everywhere outside the US into a wholly owned Irish subsidiary and lower the tax rate on all of those non-domestic sales to 2.4% when their domestic tax rate on profits is 35% and their Irish tax rate would normally be 12.5%. They screw the US with Ireland and then screw Ireland with Bermuda. Lots of other companies do the same, sometimes with the Caymans replacing or supplementing Bermuda. Sometimes they move money through The Netherlands or somewhere else for even more benefits.
"The income and payroll taxes, as well as all the rules and regulations are turning the once productive societies into the third world countries, by creating huge disincentives for people to produce, by moving capital out because societies with gigantic tax rates and so called 'social obligations' have produced entirely unsustainable parasitic governments of enormous size that are strangling the host economy."
The Scandinavian economies are the strongest in the world yet all are highly taxed and highly involved with 'social obligations'
The actual facts do not meet with your dogma, I'm afraid.
If having all those corporations in the country tax-free is so good, then WHY is Ireland going bankrupt?
Because they are not related. The country is going bankrupt because the government gave guarantees to a large commercial bank and a number of commercial/consumer banks that had lended heavily to support a ridiculous property bubble. They didn't do proper due dilligence on the guarantees, were lied to by the bankers about the size of the hole they were in and now the tax payer is now faced with a debt so large that the 'real' economy can't possibly generate enough revenue to repay.
There's a decent explanation here: http://finance.yahoo.com/news/Why-the-Irish-Crisis-is-Going-usnews-4028366968.html?x=0
Corporations don't decide that they want a margin of % percent. They always increase their margin to the highest possible amount. So don't think that keeping taxes low will do anything to lower prices or increase the wages they pay.
I live in Ireland, and like many Irish people I'm sick about hearing about the economy. Things on the ground in Ireland are actually pretty good: people are still spending so VAT income is good, and our exports are doing well throughout this recession. It is widely predicted that we will have a medium-term export led recovery. The problem we have is that the financial markets are not prepared to lend to us at less that an exorbitant interest rate of ~8% due to the perception that our deficient is massive, which is an anomaly due to the EU forcing us to include our own internal bank bailout (NAMA) on the countries balance sheet. Basically our problems are at the macro level not at the micro level: lots of Irish companies including the one I work for are still doing very well in this tough global economy thank you. The only reason we have to go to EU & IMF for funding at 5% interest is because the markets are screwing us at 8%. It is the markets that are hurting us, not corporations like Google etc. which are creating a lot of wealth in the country with the high salaries they pay.
The people who work there?
What about the other 6.2 million people who are actually being hurt by their lack of corporate taxes? They might be helping the citizens overall by letting the corporations leave.
Probably because there is no logic to it. There's been a considerable amount of conservative anger about proposals in the US to require that companies book their profits in the US before they're allowed to book their losses here. The reason being that they'd been able to get deductions without having to pay taxes here, in effect subsidizing the investments they were making in other countries without providing the US tax payers doing the subsidizing with any benefits.
And really of the proposed ways of handling the problem, it's probably the most moderate as corporations would still be allowed to not book profits from overseas operations in the US, they just wouldn't be allowed to offset domestic profits with overseas losses.
Ah yes, the "reverse *this* is the year of Linux on the desktop" argument. If the data doesn't fit, just make a wild, unsupported accusation and call it fact, then rely on it as the crux of your argument.
If the Scandinavian countries are on borrowed time, they are certainly riding their luck - they show no signs of turning into Greece and have been stable and prosperous for a long time without having to cook any books to make it appear so. I think you are grasping at straws to attempt to discredit any data points that don't fit with your narrow, anti-welfare-program, anti-big government tea party talking points.