Slashdot Mirror
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.'"
God forbid any company would actually contribute taxes to the infrastructure of the countries in which they operate. I mean, that would just make too much sense.
Give a man a fire and he'll be warm for a day. But light a man on fire and he'll be warm for the rest of his life.
If they're actually that big and that well entrenched in Ireland, they won't just pick up their ball and go home that easily
And if they're not, then who gives a fuck if they leave?
If only raising taxes in the United States were enough to get rid of J.P. Morgan Chase, Bank of America and Merrill Lynch. Ireland should jump at the chance to jettison these systemically dangerous financial institutions and replace them with sound banks of their own.
Fareed Zakaria: "While businesses have a way to navigate this new world of technological change and globalization, the ordinary American worker does not. Capital and technology are mobile; labor isn't...That makes it more difficult for the American middle-class worker to benefit from technology and global growth in the same way that companies do. At this point, economists will protest. Historically, free trade has been beneficial to rich and poor. By forcing you out of industries in which you are inefficient, trade makes you strengthen those industries in which you are world-class. That's right in theory, and it has been right in practice...And yet something feels different this time."
Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses.
Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.
There are no atheists when recovering from tape backup.
Meh hardly. Ireland is for a lack of a better term fucked, because it taxes businesses little to not at all, but relies heavily on income and sales tax to fill it's coffers. While this makes it a wonderful tax haven, it's economic death for any country as heavily socialized as they are.
It's not anywhere close to 'right-wing' economics. If you've been paying attention to the news, they're on the brink of defaulting now because of their taxation policies.
Om, nomnomnom...
Enjoy state ownership/competition in China and gross incompetence in India that will cost you more in sales and long-term brand recognition than you'd ever pay in actualized taxes.
Now Singapore is a relatively new and untested place for offshoring, which is a risk in itself.
It's also worth noting, of course, that none of these places are in Europe, which was the whole point of opening offices in Ireland to begin with. All these companies already have a presence in Asia, so basically they are threatening to do something that they already did, and they want people to believe that they'll give up their regional presence in Europe in order to effectively gain nothing.
It's a poor bluff.
.. and to eat it at same time. It does not mind all governments to be near broke, as long as they have the money. Well it does not work that way, as it seems that all countries that give them safe tax haven will either fail or be unstable to do business in long term.
Corporations should not be above people and government - as we can see they can abuse both to get what they want ($). It is okay to make money, don't get me wrong, but it appears in this process there's only one winner - Big Co, and Joe Smith ends up with the (tax) bill.
How come we have situations where companies make insane amount of money and governments that allow them to be in market are near broke? Well answer is obvious - they abuse system, or lack of it.
So if google wants to help - well it can pay their debt bill. Because they are partially responsible for it.
Ireland is discovering the dark side of a bribe based economy.
Many states are also stuck in this same "incentive" sinkhole right now. The businesses that are there came thanks to bribes and now are threatening to leave for someone offering a better bribe.
You can find a good few of the studies that have been done catalogued here. The tl;dr version is that Wal-Mart does not pay well or offer benefits, so its workers generally require public assistance to make up the shortfall. Very little of the money it makes stays local (most of it, of course, is being shipped right off to China), and it's often structured or "incentivized" by the city to pay very little tax. This results in a group of people who are long-term dependent on public assistance (both those who work at Wal-Mart and those who do not, since Wal-Marts tend to drastically reduce the number of decent jobs in an area), so it's a massive drain but only a small boost to the local economy.
I recall a story some time ago of how Wal-Marts actually had materials in some of their break rooms of how to apply for food stamps and the like. Admittedly, I can't find the cite for that, but it certainly illustrates the problem. People with a steady, full-time job shouldn't need food and medical aid.
Granted, it's not only Wal-Mart. A lot of these "minimum wage" type places are similar leeches. They're basically taking the money states and cities are putting into food and medical aid and pocketing it, since they're not paying a wage anyone could realistically live on.
To fight the war on terror, stop being afraid.
Google does care about the local area it operates in, the area that nurtured it and that it relied on for much of its talent: the Bay Area.
Ireland, on the other hand, is just a place that offered itself cheaply a few years ago. If it's not cheap anymore, it's time to pack up and leave. It's unreasonable for Ireland to expect loyalty given how Google ended up there in the first place.
When a private corporation attempts to dictate to a sovereign state which policies the state should adopt, there is something terribly wrong with the world.
Everyone knows why they are in Ireland to begin with. If they raise the rate just a little at a time, they will not feel the need to leave. Companies like that almost never follow through on threats like that just because they said they would. All they have to do is raise the rates just enough that they won't leave and also get enough of an increase to make a difference for Ireland.
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.
This is a huge issue for Google. But not because of Google's operations in Ireland. Google's whole tax-avoidance strategy, which gets Google's tax rate down to 2.4% (!), is based on a tax strategy which exploits Irish law:
Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda.
Google's income shifting -- involving strategies known to lawyers as the "Double Irish" and the "Dutch Sandwich" -- helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies by market capitalization, according to regulatory filings in six countries.
"It's remarkable that Google's effective rate is that low," said Martin A. Sullivan, a tax economist who formerly worked for the U.S. Treasury Department. "We know this company operates throughout the world mostly in high-tax countries where the average corporate rate is well over 20 percent."
The Bloomberg article describes how this works. Google "licenses its advertising technology" to "Google Ireland Holdings", which owns "Google Ireland Limited". That unit sells 88% of Google's $12.5 billion in non-US advertising. Google Ireland Limited then pays royalties to Google Netherlands Holdings B.V. in Amsterdam (which, according to Bloomberg, is a dummy company with no employees), to get the benefit of a tax break for royalties paid between European Union countries. Then Google Netherlands Holdings B.V. pays royalties to Google Ireland Holdings (headquartered in Bermuda) $5.4 billion in "royalties". "You accumulate profits within Ireland, but then you get them out of the country relatively easily. And you do it by using Bermuda." After all that, the tax liability has been laundered out of existence.
That's why Google is concerned about changes in Ireland's tax laws.