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Google Warns Irish Government Against Tax Increase 542

Posted by timothy
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.'"
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Google Warns Irish Government Against Tax Increase

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  • by theodp (442580) on Sunday November 21, 2010 @02:28AM (#34296290)

    Fareed Zakaria [time.com]: "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."

  • by Aldenissin (976329) on Sunday November 21, 2010 @02:37AM (#34296322)

    Not that I disbelieve you, but do you have any citations for the costs of a Wal-Mart to a community being more than the busienss and taxes it brings in?

  • by postmortem (906676) on Sunday November 21, 2010 @02:48AM (#34296386) Journal

    .. 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.

  • Re:Of course... (Score:5, Interesting)

    by arivanov (12034) on Sunday November 21, 2010 @03:15AM (#34296494) Homepage

    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.

  • Re:Of course... (Score:1, Interesting)

    by Anonymous Coward on Sunday November 21, 2010 @03:22AM (#34296520)

    On the bright side, if all those corporations leave they don't go broke by giving out all those tax breaks. Face it, since governments have been handing out tax breaks to corporations, it's been a race to the bottom. With high tech, you going to buy new computers soon anyway so it just as cheap to set them up in a new city/country as it is in their old city/country.

    Sad really. There was a time when companies actually contributed. You see, subsidizing corporations only works if they pay more in wages than they receive in subsidies. That hasn't happened in a while.

  • by Anonymous Coward on Sunday November 21, 2010 @03:23AM (#34296530)

    Maybe you are confused by the tenets of capitalism. Since I'm stoned off my ass, I would like to enlighten you: The amount the government gets in revenue is a tax on the total system. The effect on the amount of money in the hands of the average citizen is unchanged by a different tax structure that pulls the same amount out of the economy. The only difference is what sector of the economy that the money comes from. Different tax structures shape how money is spent and invested. To use your own example, Ireland has chosen that there should be a tax on wealth and consumption, but not on business. This means a few things, the first of which is that people will be spending less money on stupid trinkets from China; secondly, more private citizens will invest in private businesses. Any good economist should see this as a good thing: taxes on business encourage investment not only because your success can be shielded by a corporate entity, but also that investment in the private sector generally increases economic growth, and thus the aggregate wealth of the populace. But you're right, Ireland should increase taxes and scare off all of that foreign business! Go you and your ethically charged agenda, at any cost!

  • by laughingcoyote (762272) <barghesthowl@nOspaM.excite.com> on Sunday November 21, 2010 @03:53AM (#34296646) Journal

    You can find a good few of the studies that have been done catalogued here. [newrules.org] 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.

  • by Anonymous Coward on Sunday November 21, 2010 @05:06AM (#34296886)

    Having to rely on the EU so they won't collapse is a good thing? Wait, having to rely on somebody else ... isn't that ... oh my god, it's socialism!

    Capitalism my ass; it's a system for a few wealthy to prey on the rest.

  • Re:Of course... (Score:5, Interesting)

    by Runaway1956 (1322357) on Sunday November 21, 2010 @05:18AM (#34296930) Homepage Journal
    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.
  • Re:Of course... (Score:5, Interesting)

    by shutdown -p now (807394) on Sunday November 21, 2010 @05:24AM (#34296956) Journal

    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?

  • Re:Of course... (Score:1, Interesting)

    by Anonymous Coward on Sunday November 21, 2010 @05:29AM (#34296972)

    Exactly. I'm one of those 2000 people, and really, do you think I moved here because I love to live on an isolated island from where I can't travel anywhere without flying (and going through airport security and all the other tedious shit)? It's a tax haven, and if they stop being that, they'll be back to what they were twenty years ago very quickly.

    Ireland's a very nice country if you avoid Dublin and don't mind the occasional rain, but you can enjoy that on a holiday, you don't have to live here. Give me mainland Europe any time.

  • Re:Of course... (Score:3, Interesting)

    by Maxo-Texas (864189) on Sunday November 21, 2010 @06:12AM (#34297098)

    You know, I think it would be great if the executives were forced to move to china, india, and singapore.

    If they want to live under those rules and are subject to those restrictions and risk, then fine by me.

    They are actively destroying their host countries at this point. Stop letting their executives live under one set of rules while they try to have their workers under another set of rules.

  • doubtful (Score:4, Interesting)

    by Weezul (52464) on Sunday November 21, 2010 @08:01AM (#34297452)

    There are actually two separate issues here.

    Issue 1.

    We're talking about American companies based in the U.S. that base their European headquarters in Ireland for the Tax breaks. All this occurs only because higher level executive can order some European executive to live in Ireland. Alcatel, Airbus, Nokia, etc. are not based in Ireland because Ireland is a shit hole.

    If Ireland raises their tax rates, but still keeps their taxes slightly lower than France, German, England, etc., all these American companies will keep their existing European corporate headquarters in Ireland. Ireland would need to raise their tax rates slight above some other European country before any corporate headquarters moves.

    Issue 2.

    All these American companies maintain European work forces in Ireland because the corporate tax rates are lower. If Ireland raised it's tax rates, they might consider moving some facilities to European countries with cheaper labor, like Spain, Poland, etc.

    We're not talking about a terribly fast process however for various reasons such as : The company benefiting from specific work forces being near their European corporate headquarters, which we've established won't move. Inability to simple move the people coupled with a lack of suitable workers in the new country. etc.

    So what is the real cost of raising taxes?

    Easy, Ireland will cease growth due to new foreign investment. American companies will not establish new divisions in an expensive shit hole like Ireland once the corporate taxes rise to European standards. Instead, they'll either look for lower wage locations in Eastern or Southern Europe, or preferably India and Singapore. Or they'll invest in more expensive but better educated workers in probably Germany, but maybe Scandinavia or France.

    In fact, almost any jobs that could be exported to India and Singapore will most likely be exported eventually anyways. So honestly all the other countries of Europe will benefit enormously from forcing Ireland to raise it's corporate tax rates. I'd argue this holds true even if this means the ECB must bail them out eventually.

    Ireland fucked up. Germany & co. now own their ass. Time to pay the piper guys. And one payment will be more American investment in Germany instead of Ireland.

    p.s. Don't forget that China isn't exactly an option. Google is currently only discussing their moral qualms with China. All the industrial espionage is however a major problem for *all* companies. You realize even being married to a chinese national precludes you from any kind of U.S. security clearance? It's entirely realistic that the U.S. could start banning software developed in China from any sort of sensitive industrial processes. etc. China isn't a good option, plus the Indians do software better.

  • Re:Of course... (Score:5, Interesting)

    by Znork (31774) on Sunday November 21, 2010 @08:15AM (#34297520)

    No, the problem with Ireland getting hit so hard isn't because of tax breaks

    Actually, the problem with Ireland getting hit so hard is because they have an external debt of over 1300% of GDP. See, contrary to what some believe there's no actual difference between private debt and government debt these days, when government steps in to guarantee any private debt.

    If your private sector is running with a huge deficit, borrowing to finance itself, your government is going to be on hock for that. For the purpose of economic prediction you might as well count that deficit as part of the actual deficit. And in the case of Ireland, it's been running on such a very high deficit.

    The last couple of decades, the systematic privatization of many government functions appears to have included the accumulation of unpayable debt and fiscal irresponsibility, cheered on, if not enforced, by the central banks.

    What will solve it is getting inflation under control and making sure the banks in Ireland are solvent

    Banks aren't going to get solvent (on a real mark-to-market basis) until fractional reserves are forbidden. The only actual fix to these problems would be to have market set rates and full reserves, in which case you'd get automatic rate adjustment as demand for loans increases/availability of capital decreases, preventing and/or rapidly liquidating gross malinvestments.

    Of course, such an adjustment into a sustainable economy would be painful for the profligate, which means we'll get taxed instead by inflated fiat currencies to erode the debt of the irresponsible and the savings of the thrifty.

  • by DarkOx (621550) on Sunday November 21, 2010 @08:21AM (#34297540) Journal

    And yet something feels different this time.

    I actually agree with that sentiment but one has to consider the possibility that we only feel this way because we are experiencing the painful part right now. When we have the benefit of twenty years of history to look back across to the events of 2007-20011 we might indeed find that the middle-class worker has benefited from technology and global growth.

  • Re:Wrong (Score:3, Interesting)

    by the eric conspiracy (20178) on Sunday November 21, 2010 @08:57AM (#34297710)

    When a private citizen is told to shut up about any political issue it is time to hold a revolution.

  • Re:Of course... (Score:3, Interesting)

    by hedwards (940851) on Sunday November 21, 2010 @09:50AM (#34297972)
    You do realize that Bush was probably the most notable proponent of spontaneous wealth generation that the country has ever known, right? The lock box was Gore's thing, and I don't recall the specifics, but it was kind of moot as he wasn't allowed to take office.

    Bush OTOH ran this country into the ground by cutting taxes on the wealthiest on the basis that they would do more investing, even as he blew up the DoD budget to gigantic proportions and ran the debt up to somewhere around $10tn.

    At least with Gore and the lockbox we don't really know precisely what he meant. And with good reason, the conservatives get away with that crap all the time, and the Democrats haven't been doing themselves any favors allowing the conservatives to do it. Not sure stooping to that level is wise, but the voters seem dumb enough to fall for it.
  • Re:Of course... (Score:4, Interesting)

    by hedwards (940851) on Sunday November 21, 2010 @09:55AM (#34298010)
    There's a reason for that. The anti-tax folks don't want to name the cuts they'd make in order for it to work out to a balanced budget. I don't think there's anything inherently wrong with wanting low taxes, but there is something inherently wrong with Bush/Regan style tax cuts which not only aren't backed by spending cuts, but are really backed by spending increases of a substantial amount. At some point somebody has to find the money and it seems to usually end up in the lap of the Democratic party. The alternative being at some point defaulting on the loans.

    Most of the folks complaining about the tax burden are unwilling to allow the spending which is focused on benefiting them to be cut. It's easy to call for cuts when the cuts don't affect you but quite a bit harder to actually be the one to make the sacrifice. Likewise it's easier to cut programs that you don't expect to need than ones that you do expect to need. And easier to cut things you hope to never need than the ones you hope to someday need.
  • Re:Of course... (Score:3, Interesting)

    by nedlohs (1335013) on Sunday November 21, 2010 @11:23AM (#34298490)

    So you're saying that Ireland gets to collect some tax revenue on money that is made to count as profit in Ireland even though it's really generated elsewhere. And those companies don't even generate much demand on government services and hence costs.

    I see how this is a bad thing for other countries, but how exactly is that bad for Ireland?

  • Re:Of course... (Score:2, Interesting)

    by Mr. Slippery (47854) <tms AT infamous DOT net> on Sunday November 21, 2010 @11:55AM (#34298712) Homepage

    Most of the folks complaining about the tax burden are unwilling to allow the spending which is focused on benefiting them to be cut.

    Most of the folks complaining about the tax burden also somehow don't know that their taxes are very low compared to other nations, or compared to their own nation's history [unreasonable.org]. It's long past time to grow up and raise taxes, especially on the investment classes who have been giving the rest of us the shaft for the past 30 years.

  • by Animats (122034) on Sunday November 21, 2010 @12:03PM (#34298758) Homepage

    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 [bloomberg.com]:

    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.

  • Re:Of course... (Score:2, Interesting)

    by penix1 (722987) on Sunday November 21, 2010 @01:13PM (#34299216) Homepage

    Congress cut taxes, not Bush, though it was his initiative. They also cut them for every tax bracket, not just the wealthy. The highest tax bracket still pays a higher percentage than the lower brackets under our 'progressive' tax system.

    Horse shit. Unless your taxes are less than 2.4% then that is total horse shit. Let's put this into perspective as it relates to Ireland:

    http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html [bloomberg.com]

    To quote the article:

    Google is "flying a banner of doing no evil, and then they're perpetrating evil under our noses," said Abraham J. Briloff, a professor emeritus of accounting at Baruch College in New York who has examined Google's tax disclosures.

    "Who is it that paid for the underlying concept on which they built these billions of dollars of revenues?" Briloff said. "It was paid for by the United States citizenry."

    Without public funding, most of these companies wouldn't exist today and it certainly wouldn't be "global". Everything from research seed money through NIH to actual research sources such as DARPA are all federally funded. Without federal funding, there would be no internet, no cell phones, no interstate transportation system, etc... The list goes on and on. For any company to shirk their responsibility to support the country of their origin, or actively seek loopholes in the laws all while trying to get that country's government to make laws that favor them even more, now that's truly unpatriotic.

    And while I'm on this rant, tell me why any country should do things like issue patents, enforce copyright and prosecute fraud against corporations when the corporations don't want any of that funded? After all, it is taxes that pays for all that and they don't want to pay taxes right?!?

  • Re:Of course... (Score:3, Interesting)

    by visualight (468005) on Sunday November 21, 2010 @02:50PM (#34299862) Homepage

    Man, you didn't address anything I said. Owners of production vs. Capitalist...they are synonyms. Please don't find reasons to insert *ism, or magic unicorns into this discussion.

    The middle class you describe are what I refer to as the bourgeois, when I say middle class essentially mean skilled labor. Which is most of the population.

    I absolutely and clearly do not call for you to describe a perfect society. Please do not argue points I have not made. The book Animal Farm has no relation directly or indirectly to any argument I have made. To bring it into this discussion is a decent into dogma and ideology.

    All economies (even communism) are perfect for someone. Which one is best for the average man? One with a free market to be sure, but if the only important component is that there is a free market, this economy will suck for most people.

    1)"Free Market and capitalism and industrialism that even makes the middle class possible" and a healthly "labor class" if that term is more satisfying to you. Without the elements I described this class will not exist (in a state where it can also be described as a market), and by extension the wealth of the capitalists will be less than it can be. At no point do I say here that unicorns must exist, only that this class is required for a healthy economy. As I have changed the term 'middle class' to 'labor class' let me point out that this class must be healthy in that it is not only a provider of labor but can also be considered a market.

    2)You did not address this point at all. (3) and (4) fall if you prove this premise wrong but you did not try.

    3)not addressed
    4)not addressed

  • Re:doubtful (Score:2, Interesting)

    by NoSleepDemon (1521253) on Sunday November 21, 2010 @03:52PM (#34300276)
    I would have to agree - I had the unfortunate experience of the company I work for working with an Indian software house (the client insisted they outsource 90% of the development to them because they were cheaper, we handled the more complex flash stuff and design).

    At the worst point of our partnership, the Indian firm was months behind schedule, and had thrown up a smoke screen of blaming us for various delays. One of their favourite tricks was to CC the client on any email implicating us of causing delay, but to remove the client from any email chain where we made a rebuttle.

    The nail in the coffin came when they accused us of not having created all the flash pieces for the site that we had agreed to, pointing to two flash place holders on their site that we had apparently created and demanding we hand over code for the finished pieces immediately (with client CC'd of course). Unfortunately for them, they had forgotten that Flash embeds metadata in .swfs, including the creation date and timezone, which I was only too happy to hoist from the files and send back to them, with the client CC'd, of course.
  • Keep taxing (Score:3, Interesting)

    by mr100percent (57156) on Sunday November 21, 2010 @04:18PM (#34300442) Homepage Journal

    Back in like 1905, corporations paid 50% of all Federal taxes, meaning individuals weren't taking the hit. Now corporations are paying like 5% of the federal taxes. I'd say rebalance the taxes onto corporations.

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