Google Warns Irish Government Against Tax Increase 542
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.'"
Of course... (Score:5, Insightful)
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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.
Re:Of course... (Score:5, Insightful)
A lovely theory, however, right now Ireland is going tits up, so this sort of trickle down economics won't get them back up soon enough. It's Ireland's fault, and probably in part because of very low corporate tax rates to attract companies like Google.
Re:Of course... (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.
Re:Of course... (Score:5, Interesting)
Re:Of course... (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 [yahoo.com]
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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 [yahoo.com]
Hm. I'm an American, and that sounds eerily familiar.
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Re:Of course... (Score:4, Insightful)
Sounds like it is high time for a global tax treaty. No tax havens, not B$ tax rates where only the profits and none of the production is shifted, multi-national corporations need to be forced to 'PAY THEIR TAXES' at the location where the profits were made, not some bullshit offshore location. Don't want to pay the taxes at the location where the money was earned the bugger off and work else where.
Basically Ireland pretty much deserved the hole they are now in, they had special low taxes for licensed content distribution (copyright), so they could effectively cheat other countries out of the taxable income generated at the point sale.
So the real question is let them go and pay the full price or help them, meh, let em burn in their debt they don't deserve any better.
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They suggested leaving to India, China or Singapore, I don't think they're actually going to go through with that. Those countries may be cheap but they come with a laundry list of disadvantages, e.g. the Chinese totalitarian government.
Re:Of course... (Score:5, Insightful)
"Those countries may be cheap but they come with a laundry list of disadvantages, e.g. the Chinese totalitarian government."
Which is a problem for a big corporation exactly how?
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Are Google, Microsoft, etc. telling Ireland they should tax the way India and China do so that the citizens of Ireland can have the same wonderful living conditions?
doubtful (Score:4, Interesting)
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.
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Re:Of course... (Score:5, Insightful)
Re:Of course... (Score:4, Insightful)
A raise in tax rates can result in lower tax revenue
You are refering to the Laffer Curve [wikipedia.org]. What most people who do refer to it often ignore, is that the curve is described as a parabole, so you can lose taxation either by overtaxing or by undertaxing.
Giving that Ireland is going bankrupt and the rates are low... are you suggesting that they lower them yet more?
Note also that some of the examples of maximum revenue are in the 30% bracket...
Now, if you have data (any kind of data) showing that the trouble with Ireland is that they are taxing too much, please tell me. It will be more interesting than repeating the mantra of "if the government does not tax then it will suddenly have a lot of money".
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It's just like the .com boom. Governments can lose a bit of money on every transaction and make it up in volume!
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Well, I think you have somehow missed the point. After all, if the world worked as you propose, there would be no deficit to begin with.
The issue in the thread is that Ireland lowered taxes to get corps happy. Now Ireland needs money. One of the measures is to increase revenues (taxes). But, in the Internet, everytime you talk about the need to raise taxes, someone else raises the issue of the Laffer curve and says "but raising taxes lowers revenues". Of course, these posts usually forget to mention that:
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What facilities? What jobs?
Many companies use Irish tax rates through complicated legal arrangements that rarely involve actual business operations other than a post-office box.
Google uses an arrangement called the 'Double Irish' which involves a chain of an Irish-registered entity, to a Dutch-registered entity, and then to another entity which also comes under Irish law (hence double irish) which gives them something like a 2% corporate tax rate. They attribute their profits (I'm not sure if that's all pro
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Here's a story at Bloomberg about Google's "Double Irish" arrangement:
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]
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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?
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It's not bad for Ireland, but it's not great, either. The arrangement doesn't give them any benefits other than the tax revenue; and this revenue will vanish the moment the companies find a better tax shelter in some other country.
Re:Of course... (Score:5, Interesting)
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.
Re:Of course... (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.
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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
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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.
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.
As for spending, yes he spent money like a drunken sailor on leave, but the increase in defense spending was a drop in the bucket compared to the increases in Medicare spending for his prescription drug plan.
I'm not fan of Bush, I just don't like revisionist history.
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You mean, the 'tax and spend liberals' are actually proving to increase the debt just as little as the side of fiscal good sense and small government? interesting!
No conservative has ever accused Mr Bush of fiscal good sense. But even so, we're talking 8 years vs 2 years here.
Comment removed (Score:4, Insightful)
Re:Of course... (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 [bloomberg.com] 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.
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Re:Of course... (Score:4, Interesting)
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: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?
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Re:Of course... (Score:5, Informative)
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.
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"Berlin wants to - if you'll pardon the expression - unionize Europe more to prevent countries undercutting each other (and them) so much."
Yes. And that's a good thing, I should add. Macroeconomics at the country level (aggregated demand and offer, the imbalances between production and debt, taxes, etc.) are quite well known now. But countries are struggling because while they can control internally themselves, there's no global control worldwide. Taking tax heavens to an end would be an overall benefit
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They do pay in the form of sales tax to buy things to keep the business running. The people that work for companies pay tax. If you had a business that pays 0 taxes, it will still be contributing to the tax base. The companies that get heavily taxed are at a huge disadvantage to companies which are in countries which don't have much for corporate taxes. Putting taxes on a company just puts a penalty on them in the global market.
Re:Of course... (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.
Re:Of course... (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.
Re:Of course... (Score:5, Insightful)
Imagine if corporations actually paid taxes based on where their clients reside, not where they choose to set up a tax chop-shop.
Google is an American company, founded by Americans, with the majority of its operational offices in America, listed on the American stock markets, with board members and officers who are American citizens living and working in America, offering services to Americans. So what if they expanded globally? Good for them, but they are clearly still an American company - pay the American taxes or go get EU citizenship and move your corporate arses!
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Re:Of course... (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.
Re:Of course... (Score:5, Informative)
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.
Re:Of course... (Score:5, Insightful)
That's what competition does.
Re:Of course... (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.
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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.
Re:Of course... (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".
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his argument is not as bullshit as you think. Germany has its productivity in place and is somewhat able to support all the social obligations though it's entirely possible it would be better without them (they already started to introduce unpopular reforms to cut costs of welfare). Ireland on the other hand experienced unmatched growth with low taxes in last 2 decades which was definitely ok for them but the problem is that they felt too rich and simply overconsumed basing everything on rosy projections. T
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Growth isn't a direct measure for economic health. Ireland did experience unprecedented growth and wage increases, but that was also because they were so far behind in the first place.
The goal is a sustainable growth in the economy. The thing is much of the Irish growth was self-referential, such as the boom in the construction industry.
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Ireland is on the verge of Bankruptcy for one reason only, the bank grantees. In orders to protect the banks there the PM foolishly backed the entire face value of bank securities there. They also guaranteed the entire deposit in not just savings accounts but investments like money markets. Ireland had a perfectly solid fiscal situation until they put themselves on the hook for an unknowable amount. Turns out the Irish real estate situation, and the situation around MBS and CDO obligation was pretty muc
Re:Of course... (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.
Re:Of course... (Score:4, Informative)
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.
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Since the thirties, taxes on wages have
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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 ind
ireland = end of right wing economics (Score:3, Insightful)
I can't begin to count how many times over the past few years I heard that we needed to emulate the "Celtic Tiger."
Re:ireland = end of right wing economics (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.
Re:ireland = end of right wing economics (Score:4, 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.
Incorrect. Its in trouble because the government guaranteed huge amounts of speculator debt.
Re:ireland = end of right wing economics (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.
Call their bluff (Score:4, Insightful)
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?
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Re:Call their bluff (Score:4, Informative)
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.
Fantastic opportunity for Ireland (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.
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Banks create money out of thin air. It is just a big Ponzi scheme. Sooner or later, the pyramid falls...
Re:Fantastic opportunity for Ireland (Score:4, Informative)
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.
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Re:Fantastic opportunity for Ireland (Score:4, Informative)
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# [google.com]
http://video.google.com/videoplay?docid=6507136891691870450# [google.com]
On a side note (watch the first video), I live near Jekyll Island.
Re:Fantastic opportunity for Ireland (Score:5, Informative)
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%.
Curious... (Score:2)
It seems the countries they compare to Ireland such as China have a completely different lifestylet. Different lifestyle and social norms that usually run on the more luxurious side and the average person perhaps has higher expectations about how things should be or what they get out of the system.
Wouldn't that mean it's a bullshit comparison? Yes, China's tax rate is lower, but the government is not expected to provide the services that Ireland's is expected to?
Re: (Score:3, Insightful)
It's not a bullshit comparison. You see, the companies are not interested in running the government, they are interested in running their own business which means that if it is cheaper in China or India or with the same results, then that's where they can run their business for less.
The comparison here isn't about what government provides it's citizens or the citizen's expected lifestyle, the comparison is on where the company can be run the most effectively for the least amount of expense.
Personally, I thi
Re: (Score:3, Insightful)
Except that Google and many other tech companies don't pay out dividends at all.
Corporate tax is the equivalent of income tax for corporations. So if everyone has to pay their income tax, why should corporations be exempt of that?
You seem to have a strangely optimistic fate that the corporations will do good with the money, but fail to present a good reason why they should do so.
Employees are just assets/liabilities of them, but don't really belong in the same bucket with the obligations of their income.
Zakaria: Something feels different this time. (Score:5, Interesting)
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."
Re:Zakaria: Something feels different this time. (Score:4, Insightful)
The difference is, largely, that corporations can have their cake, and eat it too. International law is set up so as to, for example, allow primarily U.S. companies like Google and Microsoft to incorporate in countries with much looser strictures on corporations, while still operating freely in the U.S.
Re: (Score:3, Interesting)
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:Zakaria: Something feels different this time. (Score:4, Insightful)
I tend to agree that it's different this time, but not necessarily for the same reasons Zakaria is pointing to. (Didn't read the Time article, just what the parent was quoting.)
Labour is less mobile than capital and technology, but that's not the problem. Labour's basic problem is that it's value is decreasing globally. You can't found a business on labour any more, because you can't produce stuff that people want for long. Our economy has become so productive and skill-based that labour can't keep up. Any skill that labour has will become redundant in a decade or so. This is a big problem, and as society and economy we really don't have any tools to cope with this.
Another development that disadvantages labour is that people, especially young people, tend to value things that are post-scarcity. They don't want big house that they can fill with designer furniture, they want an address with a broadband connection that they can fill with music, comedy and games.
Developing world labour has a competitive advantage right now, but that won't last for more than decade or two. They will caught in the same bind.
I think we need seriously start to think how to bring about sustainable labour.
Business as usual (Score:4, Insightful)
A corporation serves only its self interest - it cares not about the local area(s) it operates in as long as it can get some sort of special tax treatment etc. They want full use of roadways - airports - water -etc by paying nothing or as little as possible. Yes they hire locals who have to make up the "sweetened tax deals" out of their own earnings.
I say let them move all their crap to crappy nations and see how that works out for them.
Re:Business as usual (Score:4, Insightful)
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.
Let the Ceos settle where they move the companies. (Score:2, Insightful)
This madness has got to stop.
Executives for healthy companies that move a bit too many activities abroad for no good reason should be forced to stand behind their acts and move their ass where they put our money and jobs.
Yeah. Just joking.
Standard reporting income at lowest taxed country (Score:5, Insightful)
Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.
Time to pay the piper... (Score:2)
Ireland has been courting globalised corporations for years by offering grant incentives in addition to the low corporation tax. Now, they must learn to compete on a fair and level playing field. If it means a measure of short term pain as corporations jump ship out of the Emerald Isle, then that is just a medicine that Ireland needs to face. They can prevent it of course: Ensure that those corporations considering fleeing see that their Irish employees add significant value to their company and that it wou
Go ahead, move there. (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.
Google wants their cake ... (Score:4, Interesting)
.. 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.
IBM: Imagine There's No Country (Score:2)
Working Beyond Borders [ibm.com]
If you hear competitiveness, reach for your gun. (Score:2)
...since a company wants to hold your country hostage to its demands.
If they want to leave, make it hurt badly(if not something that outright kills the company). Then make the company an example of how things can go wrong in a robbery. The government isnt there for the company, it is for the people that end up getting hit when the company decides to leave.
Re: (Score:3, Insightful)
If they want to leave, make it hurt badly(if not something that outright kills the company). Then make the company an example of how things can go wrong in a robbery
And then no company will want to set up shop in your country again. Why would they, when the risk is driven up that high?
Wrong (Score:4, Insightful)
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.
Re: (Score:3, Interesting)
When a private citizen is told to shut up about any political issue it is time to hold a revolution.
Re:Wrong (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.
Ireland just needs to boil the frog (Score:5, Insightful)
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.
A Proxy War (Score:3)
However, the larger question here is whether the EU/IMF bailout of Ireland will be sensitive and sympathetic. If the rulers of the EU (i.e., France and Germany) use the exercise as an excuse to strip Ireland of the few advantages it has, such as the option of offering low rates of corporate taxes, claiming "harmonisation" but with the real aim of luring these companies elsewhere then the "rescue" will really amount to a rape. These days you don't need to strip factories and ship them home, you just need to shuffle the foreign bank accounts and trusts around. Given the arrogance and clumsiness of those who run the EU, it would be prudent not to be too confident.
Enough already! (Score:5, Informative)
Google's tax-avoidance scheme needs Ireland (Score:5, Interesting)
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.
Keep taxing (Score:3, Interesting)
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.
Re: (Score:2)
Will we be? Because, well, the whole issue is that those corporations are contributing close to bupkiss in the way of taxes and other revenues to the member state/nation.
Interesting fact - in many areas, a Walmart actually costs a community more than the value of the business and taxes it brings in. Generalize, and apply to this topic.
Re: (Score:3, Interesting)
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?
Re: (Score:2)
I don't have the citation, unfortunately; my wife turned it up, and the discussion she shared it with me during was some time ago. I'll see if she remembers where she found it, and post it in a reply tomorrow-ish, if possible.
Re:Watch out Delaware (Score:4, Informative)
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/ [wakeupwalmart.com]
Re:Watch out Delaware (Score:5, Interesting)
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.
Re: (Score:3, Funny)
Doubtful.
But this reminds me of an anecdote I once heard where the Colombian drug lords offered to pay off the national debt if the Colombian government legalized drugs.