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Taxes Lead Angry Birds Maker Rovio To Consider Move To Ireland
jones_supa writes with this news, straight from The Irish Times: "Rovio, the Finnish company behind Angry Birds, is considering moving its headquarters to Ireland, chief executive Mikael Hed has said. Rovio employs approximately 400 people, mostly in Finland, but Rovio is in contact with IDA Ireland about establishing headquarters here. The reason for the move would be corporation tax rate, which in Finland is 24.5%, while Ireland's rate is 12.5%. Companies such as Google and Facebook have also set up European headquarter operations in Dublin for the same reason. Hed said that if the decision was made to move to Ireland, the company would then decide exactly what elements of its operations would move. 'If we did make that decision then it would be a natural thing to do to have some production [in Ireland] also.'"
For better or for worse, betting on self-interest over altruism usually wins.
State governments here in the US try to raise revenue by luring companies to set up shop in their states using tax incentives. The net result is a sort of tragedy of the commons - overall tax revenue is lower and even though politicians try and claim they're "creating jobs" they're really just stealing them from other states.
When governments (collective entities) try to act like businesses (competitive entities) it seldom works out. Usually only a few who are able to take advantage of the situation benefit.
Every store I go in to seems to have Angry Birds figures, cereal, watches, and adult toys. They are all made in China already. Why not just finish it off and move the whole company over their if that is their top brand?
Damn_registrars has no butt-hole. Damn_registrars has no use for a butt-hole.
They benefited from the system all their lives but when it's their turn to pay in, they leave. For what? A 10% reduction on taxes on profits? Currently, Rovio has a net income of 48 million Euros according to Wikipedia (for how long is anybody's guess, Angry Birds won't stay popular forever and that's the only game for modern phones that they have, the rest appears to be old J2ME games, none of which gained any real popularity), so that means saving about 4 million euros in taxes, while at the same time dealing with both a perception of greed which can certainly hurt them among conscious consumers as well as the costs associated with moving the operation to Ireland.
The real issue with states giving tax breaks to entice companies to move there isn't simply them "stealing jobs from other states rather than creating them".
The reason such measures usually fail is a state's failure to demand specific goals as part of the deal.
Time and time again, companies took advantage of huge tax breaks only to plunk down some sort of office or warehouse that doesn't actually hire more than a few dozen employees. That, or they may only stay as long as the tax break continues, uprooting the whole operation after the 3 or 5 year deal ends.
IMO, there's nothing inherently wrong with state trying to encourage businesses to set up shop within their borders. Even though we're a group of 50 United States, each one still competes with each other internally, much like corporations with multiple divisions often operate each division so it competes with the others.
The PROBLEM is, states need to get a clue about such deals, ensuring it's beneficial for both parties. (Most likely, corrupt politicians simply don't care, because they're getting some kind of kickback or garnering support they need by making the deals happen, at any cost to the citizenry of the state.) Any such arrangement should include contingencies, such as "You will lose the tax break AND owe back taxes from the time you moved here if you don't consistently keep X number of people employed, at wages no less than $Y per year." and "Moving out of the state for a period of 10 years from the time this tax break expires constitutes breach of contract, and again, is subject to back taxes."
A company who genuinely has a desire to move to the state (with a belief it really benefits them in the long-haul) would still gladly accept such an arrangement, IMO. The ones who complain it's too restrictive were likely just trying to milk the system to the state's detriment anyway.
Their "dues?" The way governments piss away money, I'd say it's better to give citizens jobs and starve the government beast.
I don't know where you live, but Finland is not the same as the US. Like in all Nordic countries, the taxes are actually used for something other than military ventures - namely providing education and healthcare for everyone and a stable society with functioning infrastructure. The authors of Angry Birds have benefited from free education at the Helsinki University of Technology, free healthcare all their lives, etc.
Is it not reasonable that when they become successful, they too should pay into the system in order to pay for the education and health of the current generation just as others paid into the system to provide these services to them, providing an educated and healthy workforce for the benefit of among others their own company?
Why should that same money be taxed yet again at the corporate level ? Does the Finnish gov't do anything of value with those taxes ? Mine does not (Canada).
Depends what you consider value. Some things that might be worth the extra tax rate: Infrastructure, public healthcare, well educated workforce.
What?
U.S. States that are currently a hub/center for some particular industry were not alway so. American history is full of migrations from one state to another to follow jobs. Why is it all of sudden wrong to do so?
I am not sure your tragedy of the commons argument applies here. Some state governments have become terribly inefficient and somewhat parasitic of their traditional industries, California may be an example. Why should some company or industry be forced to stay put to prop up such a mismanaged local government? Implicit in your argument is the "all other things being equal" caveat, but things are not equal. Some states will have an inherent advantage due to access to transportation and distribution systems, access to natural resources, access to energy sources, access to a trained work force, access to universities, an appealing climate, etc.
Good government seems to rely on a system of checks and balances. I think we need to have company mobility to some degree as a check/balance against the mismanagement of local government. A lack of competition between states may be just as bad as too much competition.
Well, the consumer will see the savings... I mean that is what the argument has been.
Except, I dont see the "savings". Hell, when oil goes down on the stock market, it has to be down for 2-3 days before we see the change at the pump.
Trickle down economics in deed...
Is it not reasonable that when they become successful, they too should pay into the system in order to pay for the education and health of the current generation just as others paid into the system to provide these services to them, providing an educated and healthy workforce for the benefit of among others their own company?
That's only reasonable when your view of the future reaches beyond the quarterly results your bonuses depend on.
Caring for the educating your future employees and consumers is not part of the Anglo-Saxon company moral.
Oops, I used company and moral in one sentence...
"The likes of Facebook and WhatsApp are free to those whose privacy is of zero value."
What is it with people that take advantage of the high social development afforded by higher tax rates only to run off to a low tax rate area when they become rich?
We really need to make sure people understand that ALL wealth comes from government. Government makes sure your employees are educated instead of brain-dead religious morons, that roads/trains/airports exist to deliver your products to customers, that the banks holding your money don't have disappearing bank accounts, and on and on.
None of this would have been possible without a government paid for by taxes.
The richer you are, the more dependent you are on government, as a larger portion of your wealth came about because government made it possible for you to be wealthy. You can't be rich in a libertarian paradise like Ireland or Somalia. Does anyone even know any rich Irishman? Do they even exist?
It seems people become libertarian AFTER they become rich, as they have the mistaken belief that they somehow made their wealth themselves. They have no idea the kind of infrastructure and work government put in to get that one dollar to travel into their hands in the first place. No, the wealthy didn't magically conjure up that dollar into their pockets.
cost reductions *rarely* result in lower retail prices -- they *always* increase profits, though.
Increased profits result in increased competition.
Increased competition results in lower retail prices.
like so many others, another asshole who just wants to take and not to give. For the likes of him there should be an island where there are no taxes and consequently nothing what is made possible by taxes - just a bunch of other greedy assholes who all want to get richer by taking the money of the others.
Society would be a better place without people like him.
yeah, that worked really good for ma bell.
Let me guess, you're not old enough to actually remember Ma Bell.
I am old enough, and I remember having to rush through long-distance (and even local) calls, so they wouldn't end up costing a fortune. That was when Ma Bell was a legal monopoly and didn't have to worry about competition.
Prices dropped dramatically once competition was allowed in.
That mechanism is incredibly slow and in most industries could only ever operate on a scale of many years.
And you just can't stand the thought of that first company making any evil profits, even though they were the first to market, and they were the risk-takers who didn't know ahead of time that there would be any profits.
And, yes, for things like heavy industry, it takes a while for competition to get up to speed. That's not a bad thing. It's far better than, for instance, having the government rushing to give out loans to companies that can't compete even with the government handouts, as we've seen several times in the last few years.
In Angry Bird-like industries, where they have an actual monopoly on that game and a virtual monopoly on games of similar ilk, the slowness is actually legislated in. Essentially, anywhere there are patents and copyrights slowness tends to be institutionalized.
Some of this is by design. Creators should be able to profit from their work for a while, which is why we have patent / copyright laws.
So there is no capability for the market to operate in these areas, as society has already decided that it should not. In infrastructure heavy sectors, the barriers are natural, in IP heavy sectors barriers are largely legal.
So there will be no end-user price reduction. (Hell, its free on Android, so unless you expect to be paid to download it, it can't get much cheaper).
This move to Ireland is strictly a tax avoidance move by the owners, and will help their Yacht fund. Further, its probably a bluff, trying to secure some tax breaks from Finland, because you don't uproot 400 people (or even the 100 people you really want to keep) just to avoid some taxes.
Figures for Rovio total revenue suggest about $95 million in total revenue (2011). After paying wages and plant costs, their earnings (before taxes) was $58.7 dollars, which suggests they are banking 65% of their total intake.
Paying 12% Ireland tax rates will save them around 7 Million bucks per year in taxes over the Finland rate.
Since you could probably move the company lock stock and server farm for $7Mil, the multi-year payout would be significant, but not earth shattering.
Angry Birds has about run its course, and unless they have a stable of additional games in the pipe-line there may not be any long term advantage in moving.
Ta-hoochapie!
Sig Battery depleted. Reverting to safe mode.
It's not surprising. They're going to try to pocket that money they save for themselves alone at least as hard as they're going to try to save it in the first place.
The magic bunny, er I mean invisible hand, of of laissez faire capitalism as espoused by Ayn Rand and Mitt Romney or to speak more precisely Mitt's handlers, puppet masters and soon to be policy makers Paul Ryan and Grover Norquist benefits, as a matter of historical fact, the top 1% as we all know by now:
http://www2.ucsc.edu/whorulesamerica/power/wealth.html
Some of this is by design. Creators should be able to profit from their work for a while, which is why we have patent / copyright laws.
This is a misconception. Patents don't exist to help inventors profit from their invention. They exist to encourage inventors to reveal the technical brilliance behind their inventions to the rest of society, thus benefiting society at large. That's why they exist. In order to lure the brilliant people at Angry Boids to tip the hand of their overwhelming genius to the eternal benefit of a grateful society, they are offered by the government a time-limited monopoly. Not all inventors opt in, e.g. Google.
Patents are not issued to help inventors make money or profit from their invention. They're issued to further progress in the useful arts and sciences.
It's an important distinction. If the patent system doesn't have the effect of advancing the useful arts and sciences, then the patents should not be issued and the inventor be damned.
This goes to the heart of the software patent debate. Do software patents advance the useful arts and sciences? In fact, they impede them. So they should stop being issued and those issued should be nullified. What about the inventors profiting from their work? That is not the concern of the government or the patent system.
"....even though they were the first to market, and they were the risk-takers who didn't know ahead of time that there would be any profits."
Bullshit. Seriously. We were talking about oil. Hundreds of wildcat outfits rushed to take advantage of the Texas oil boom in 1901, over one hundred years ago. Today's mega-corporations bear little to no resemblance to those companies, and most, if not all of their "risks" are insured and subsidized.
Any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.
"However that money will be reinvested into the company to allow the company to grow, and hire more people."
Assumption. And even if that's what's being said, it's a rationalization. Effective tax rates for corporations are at the lowest they've been for decades. Many industries, like the aforementioned oil industry, are enjoying record profits and sitting on mountains of cash.
And yet job creation is at a standstill. If giving more money to the rich "creates jobs", everyone would be employed by now. They're not.
In all likelihood, the extra profit will sit on the companies books or be doled out to upper management in the form of bonuses and other executive perks. The only "reinvestment" likely to occur is in yet another Ferrari.
Any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.
I'm assuming that you're talking about the US Federal government. You are making two assumptions here:
1) That the US Federal government still exists to serve the citizens of the US and
2) That the corporations that benefit the most from the current labyrinth of Federal tax law, loopholes, etc., would actually permit that. No Federal taxes on corporations would actually help level the playing field, and there's NO way that the corporations that are benefiting from the US Federal tax code as it currently exists will ever permit that.
After all, they paid good money to lobby for them, and they're entitled to the rewards, right?
Cynically,
dj
Why would it not make sense, to have the US charge 0% corporate tax, since in thought, these taxes just get passed to the consumer in price considerations?
It's a silly argument.
All taxes are ultimately passed to the consumer. Personal income tax, too - since the company has to pay higher to its employees to entice them to work for it, and of course it also needs to raise prices for compensate. Ditto for sales and property taxes, since they affect the cost of living, and therefore indirectly how much people will ask in wages.
At the same time, you could similarly argue that taxes are "passed on to the corporations" - if I'm taxed higher, I'll ask for a bigger wage.
The truth it, taxes aren't "passed on to" anyone. They are simply extracted from the economy. Both companies and physical persons are actors in that economy, so both pay.