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Google Warns Irish Government Against Tax Increase

Posted by timothy on from the shame-if-anything-was-to-happen dept.

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.'"

19 of 542 comments (clear)

  1. Of course... by Serenissima · · Score: 5, Insightful

    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.
    1. Re:Of course... by Lumbre · · Score: 5, Insightful

      Well, Microsoft isn't avoiding taxes in Washington by "selling" from Nevada. Oh, right, they are.

      Are interstate commerce excise taxes somewhat proportional to international tariffs? I'd like corporations to feel a pinch of pain when they export, just like what I feel with my small business. Then again, corporations have less personal liability.

    2. Re:Of course... by williamhb · · Score: 5, Informative

      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.

    3. Re:Of course... by Anonymous Coward · · Score: 5, Informative

      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.

    4. Re:Of course... by VanGarrett · · Score: 5, Insightful

      After the Irish raise their corporate tax rates, and all of those large, international businesses pull their facilities out, how many jobs will be lost? Thousands? Tens of thousands? How many businesses besides Google, Microsoft, HP, Bank of America, Merril Lynch and Intel will leave? How many businesses will close their doors, because much of their income was based on the spending and consumption of those businesses, and their employees?

      A raise in tax rates can result in lower tax revenue. Higher taxes cause a decrease in in the rate of taxable transactions. At a certain point, the ratio of tax rate to taxable transactions produces a maximum possible tax revenue. Any attempt to increase tax revenues beyond that limit, is futile.

      --
      Learning about brewing beer, by brewing beer.
    5. Re:Of course... by arivanov · · Score: 5, Interesting

      Kind'a...

      If you do not contribute to the economy of your host country one of the results is that it will have a low living standard, housing in disarray, unemployment through the roof. This will automatically put a number of limitations on what kind of people you can hire. To be more specific - you can hire only wageslaves with non-working dependants.

      While that may be OK if your aim is to import labour from Talebanic countries where the wife is a houseslave, it does not work well in the civilised world. If it did, Google would not have had to post 200+ positions on a weekly basis for Dublin and consistently _FAIL_ to fill them. The situation with a lot of other emloyers in Ireland is not much different. They all continue to have a long list of positions for qualified labour open.

      That is to expected, because foreign labour does not want to move into the middle of a dump (and Ireland in the economic sense is a dump) and the Irish educational system does not have enough money (taxes are actually used for something ya know) to produce an equivalent.

      So overall, Google should stop wingeing here and realise that by moving a high skilled labour activity into a low tax rate country it has shot itself in the foot in the long term. High skilled labour, Low Taxes and Growth - you have to pick two. All three together are mutually exclusive.

      --
      Baker's Law: Misery no longer loves company. Nowadays it insists on it
      http://www.sigsegv.cx/
    6. Re:Of course... by mr_mischief · · Score: 5, Informative

      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.

    7. Re:Of course... by pesho · · Score: 5, Insightful

      Hmmm, nice theory. Let's see how the facts support it. On one hand we have Ireland, that has low tax rate, which has given the incetive for the people to produce. You would expect it to be rich and prosperous society, but somehow it is on the verge of bankrupcy and the only way out that they have is a bailout that is going to be paid for mostly by Germany and France. Now, Germany and France are as you so eloquently put it "...societies with gigantic tax rates and so called 'social obligations...'" that "have produced entirely unsustainable parasitic governments of enormous size that are strangling the host economy.", yet somehow they are the "productive societies" and Ireland is the "third world country" in the example that we are discussing. Do you see why I am tempted to call your argument " bulshit, bulshit".

    8. Re:Of course... by kaffiene · · Score: 5, Informative

      "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.

    9. Re:Of course... by Runaway1956 · · Score: 5, Interesting

      Perhaps you're not looking at the question properly. Please, change your perspective. slightly, then take another look. Let's ask the question, like this: "If having all those corporations in the country tax-free is so good, then WHY is Ireland going bankrupt?" I'll be honest - I am no economist. I don't understand all the tax schedules, or who gets tax breaks, or why, or how. What I DO KNOW for certain is, the corporations are parasitic entities, with only their own welfare in mind. If the corporations were symbiotic, instead of parasitic, they would be examining how taxes benefit the host nation, and negotiating over those taxes. You know, give and take, compromise, stuff like that. Instead, we see here that the parasites are ready to find a new host if this one goes belly up.

      --
      "Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
    10. Re:Of course... by shutdown+-p+now · · Score: 5, Interesting

      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.

      What I don't understand is why this is legal outside of Ireland (i.e. in those countries which are losing money because of it).

      Don't get me wrong - if countries want to compete on income tax to attract businesses, I'm all for it. It's up to the citizens of a democratic state to decide how they want to run things in it, and that includes tax rates. And Google, Intel, Microsoft etc are quite welcome to enjoy the benefits of those low taxes - by moving their actual production facilities to those places.

      But why the hell do they get to pay low taxes in Ireland off products that are actually made - and often sold! - on US soil? Their businesses enjoy all benefits of that society, but then skirt their obligation. Why is this legal?

    11. Re:Of course... by Splod · · Score: 5, Informative

      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

    12. Re:Of course... by Znork · · Score: 5, Insightful

      The bank itself wouldn't lend money; the banks customers would explicitly need to deposit money into bond funds (if they wanted any returns). It's not that far from what's done today, the difference in function is mainly in what guarantees are made, what time frames on withdrawals you have, and who gets to eat the losses.

      The systemic difference would be more significant however. As money supply would no longer expand to accommodate asset bubbles, the interest rate a saver would get would rise as demand rose for money (for example, for investment in the bubble) and the bubbles would get cooled off/liquidated much faster and in a far earlier phase.

      There are potential drawbacks, of course, like the higher interest rates in general (that reflect the actual value of risk and liquidity preference) and the requirement that the economy as a whole carry balanced loans and savings, but compared to the drawbacks of bubble/implosion economics, it's a whole lot fairer as someone has to pay either way. There'd also be the issue of deflation, as prices would fall as production improves, but that's already true across vast segments of the economy, indicating that the theory that inflation (as measured in wage-related prices) is necessary or even desirable may be deeply flawed.

  2. Fantastic opportunity for Ireland by Christian+Marks · · Score: 5, Insightful

    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.

  3. Re:ireland = end of right wing economics by Mashiki · · Score: 5, Insightful

    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...
  4. Go ahead, move there. by Anonymous Coward · · Score: 5, Insightful

    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.

  5. Re:ireland = end of right wing economics by im_thatoneguy · · Score: 5, Insightful

    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.

  6. Enough already! by j_col · · Score: 5, Informative

    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.

  7. Re:Wrong by Aquitaine · · Score: 5, Insightful

    I wish I had an 'overrated' mod point.

    'If you raise taxes, I will move' is hardly 'attempting to dictate.' It is the prerogative of any private person or entity to move for whatever reason they like, whether or not it is a good idea. This happens all the time -- look at the number of businesses moving out of California and to places like Texas.

    I'm astounded at the number of posts claiming that all of Ireland's problems are due primarily to its low corporate tax rate, as if those were the only two things that foreigners know about Ireland and so therefore one must have caused the other.