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Google Warns Irish Government Against Tax Increase

timothy posted more than 3 years ago | from the shame-if-anything-was-to-happen dept.

Google 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.'"

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542 comments

Of course... (5, Insightful)

Serenissima (1210562) | more than 3 years ago | (#34296224)

God forbid any company would actually contribute taxes to the infrastructure of the countries in which they operate. I mean, that would just make too much sense.

Re:Of course... (2, Insightful)

Dachannien (617929) | more than 3 years ago | (#34296316)

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... (4, Insightful)

MightyMartian (840721) | more than 3 years ago | (#34296420)

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... (5, Insightful)

VanGarrett (1269030) | more than 3 years ago | (#34296476)

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... (1, Interesting)

Anonymous Coward | more than 3 years ago | (#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.

Re:Of course... (2, Insightful)

sumdumass (711423) | more than 3 years ago | (#34296706)

This is lovely. I feel like I'm back in the 2000 election cycle with the fuzzy math floating around and a magic lock box with the key to the lock box that was going to hide where no one, not even he, could find.

Please tell me something, is 12 minus 7 percent of $100k more or less then 12 percent of $0? Is 20% of $50k times three more or less then 25% of 0 times 0? You see, I'm confused because the government is making more by discounting tax revenue by means of tax breaks then they would be making by not having anything to tax at all, so how are they going broke and how would they not go broke without them?

No, the problem with Ireland getting hit so hard isn't because of tax breaks, it's because they primarily attracted services oriented companies which do not create wealth in the portion of enterprise located in their country. At best, service companies consume wealth as they are primarily a middle man. When capitol becomes in short supply, those companies get hit first and the worst. This cascades down which also effects jobs and other tax revenues.

In 2001, corporate taxes was just ~15% of Ireland's income taxable. In contrast, in 2008, the 2009 budget was 65 billion Euro in deficit at almost 10% of GDP. This means tax breaks for corporations is not what caused this problem and getting rid of them is not going to solve it. What will solve it is getting inflation under control and making sure the banks in Ireland are solvent to capitol flow remains possible. Again, taking money from corporations is not going to fix either of those and most likely would retard most efforts in it.

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296588)

Jobs lost? Many of the big companies get so much tax benefit that the jobs they provide are economically hardly better than unemployment aid.

Re:Of course... (1)

guyminuslife (1349809) | more than 3 years ago | (#34296622)

Mmm. I suppose that one of the things that got it "tits down" in the first place was its status as a corporate tax haven. Biting the hand that feeds you is a bad long-term strategy, particularly because Ireland chases off its sugar daddies, they won't come back.

Re:Of course... (5, Informative)

williamhb (758070) | more than 3 years ago | (#34296462)

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.

Re:Of course... (3, Insightful)

Christian Marks (1932350) | more than 3 years ago | (#34296502)

It's refreshing to see arguments informed by empirical fact instead of ideologically motivated anti-tax dogma. We need to see the world's spreadsheet. It is counterproductive to rely on qualitative generalities about quantitative specifics.

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296630)

Well, Chinese companies will be more than happy to replace these ones, so let these arrogant companies leave if they want.

Re:Of course... (1)

harlows_monkeys (106428) | more than 3 years ago | (#34296634)

On the other hand, if the company just has a token presence for tax purposes, then they aren't really using any of Ireland's resources, so any tax they pay is a net win for Ireland.

Re:Of course... (1)

Man On Pink Corner (1089867) | more than 3 years ago | (#34296684)

(Shrug) The employees already pay taxes, and the shareholders are taxed on the increase in value when they sell their stock. People making your argument about "even the toilet cleaners pay higher tax rates than the company does" are basically lying with figures. (And yes, that includes Warren Buffett.)

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296508)

Yeah, these American companies export more goods than they "import" from their home country and they have huge numbers of people working for them in Ireland. They totally don't have just an office in Ireland which funnels money from Europe through Ireland to the US.

If Google wants to leave, let them. Perhaps Google can find a cheaper front in Europe through which to conduct their business. Probably not.

Re:Of course... (2, Insightful)

Anonymous Coward | more than 3 years ago | (#34296330)

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... (1, Insightful)

Anonymous Coward | more than 3 years ago | (#34296418)

This is standard whiny nonsense from the Corporations. Ireland should slap them with a tax bill and threaten to freeze any assets they have in Ireland if they threaten to leave.
These f***ing Corporations are parasites.
They're registered in Ireland where not only do they not have to pay the 'going rate' of tax but also don't have to publish detailed accounts. Microsoft's initial deal was a 0% tax rate in exchange for using Ireland as the gateway to Europe. Now that the Irish economy has inevitably failed the same Corporations that have taken advantage now threaten to leave.

With friends like this who needs enemies?

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296474)

Freeze their assets if they threaten to leave? I believe Cuba tried that about 50 years ago... do you remember how that worked out for them?

Re:Of course... (5, Informative)

mr_mischief (456295) | more than 3 years ago | (#34296718)

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... (1)

dkf (304284) | more than 3 years ago | (#34296554)

They do pay in the form of sales tax to buy things to keep the business running.

They don't pay that in Ireland because they're using European VAT rules, which effectively allow companies to reclaim sales taxes. For most companies those rules make a lot of sense, since they're taxing the value added by the company, but sometimes they come out more than a little odd. It's quite possible that Google are using one of those oddnesses...

Re:Of course... (5, Insightful)

Lumbre (1822486) | more than 3 years ago | (#34296400)

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... (4, Insightful)

alphatel (1450715) | more than 3 years ago | (#34296442)

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!

Re:Of course... (5, Informative)

Anonymous Coward | more than 3 years ago | (#34296472)

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... (5, Interesting)

arivanov (12034) | more than 3 years ago | (#34296494)

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... (1, Insightful)

roman_mir (125474) | more than 3 years ago | (#34296690)

bullshit, bullshit.

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 correct answer is to reduce the gov't to a tiny subset of what it is, to stop pretending there are such things as social obligations, to stop robbing the producers by taxing their income (all income and payroll taxes must be abolished) it is the worst idea ever to tax income. Taxing income first, takes away your capital that you can reinvest. Taxing income is not taxing consumption, taxing income means taxing work. How dare anybody tax work of anybody? That's just pure serfdom and slavery. Taxing consumption is the correct thing to do to run a gov't, if indeed gov't is needed at all.

Gov't IS consumption, it's NOT production, so gov't must be supported only through the money that is used for consumption, because then it will clearly represent a fraction of the money that is diverted by the productive members of society towards consumption, it will keep the gov't in check in terms of its ability to affect society and to destroy economy by growing and reducing the competitive nature of the economy.

Gov't is not a producer, it doesn't have and cannot create wealth. It can only take wealth away. However gov't is also a luxury. It is a luxury, which is, like any other luxury, must be controlled by the willingness of the people to SPEND money.

When people control their spending, they are creating savings. Savings is the only true way to raise capital. Not borrowing, not money printing - savings.

Currently the gov'ts of the countries that are unproductive, are only exacerbating the economic woes that their societies are facing by destroying the ability of the society to raise capital.

The gov'ts do it in these ways:
1. Inflation - expanding the monetary supply.
2. Taxes - taking away money that is not even allocated for consumption.
3. Borrowing - taxing society in the future, with interest on top of that - pushing the problem to the future generations.
4. Setting 0% or near 0% interest rates.

Gov't shouldn't be doing any of these things. It shouldn't even be allowed to do any of these things. By doing these things the gov't is punishing the savers through taking away their money they worked for either directly (taxes) or indirectly (inflation + borrowing, which is also taxes and interest).

A normal household has only 2 choices to increase the purchasing power:
1. Increase income.
2. Reduce spending.

That is what people HAVE to do to get through tough times.

Gov't doesn't have anything they can qualify as income, all the money its taking in is not something gov't earned through any productive means.

So gov't has only 1 choice: reduce spending.
But it won't do that. Gov't doesn't see it even possible to reduce its spending, gov't is a system that cannot be reduced through any normal means. It's like a black hole, no matter how much you throw at it, it'll take it and than will take every single other thing you can throw at it.

--
Google is doing the right thing. European Union was an interesting idea when it started, but only politically, it should never have allowed the weakest links to be in the same money as the strongest players, so Germany and Ireland or Greece are NOT in the same economic position, they shouldn't have the same currency. Switzerland has figured this out and did the right thing - stayed in Swiss Franks, so those went up by 5 times over the years and Euro is consistently going down.

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296748)

And that's why a lot of countries with high taxes have the hightest standard of living? Sweden, Finland, Norway, Belgium, Austria, ...?

Re:Of course... (5, Insightful)

pesho (843750) | more than 3 years ago | (#34296770)

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".

Re:Of course... (0, Troll)

roman_mir (125474) | more than 3 years ago | (#34296808)

The point is about USA, not about Ireland.

The USA is losing the production capacity and thus it is losing the real wealth.

Obviously it is a game, where Google is using a loophole by having its financial headquarters in Ireland to avoid US taxes.

Eventually, as Ireland raises taxes, Google will move somewhere else.

But the real problem is not for Ireland, it is for US, as Google and all other companies are moving out and will move out completely, if forced to play by the rules of US government.

--
I can also give you a similar counterargument - if spending and inflating money is what creates wealth (as US gov't seems to believe), then ZIMBABWE must be the most productive country on earth.

--

My argument is not bullshit, because it is exactly showing what is happening - production capacity is leaving those countries, with the most spending.

Germany and France will also face the music eventually, it's just they are not first in line. First in line is USA.

Germany is already forced to bail out entire freaking countries, lets see how long that kind of spending and inflating can continue without Germany either leaving the EU or also starting to feel the heat of companies leaving.

Re:Of course... (0, Troll)

khallow (566160) | more than 3 years ago | (#34296802)

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.

The thing is even shell companies contribute to the economy. Someone is paid to file the paperwork. And any real presence involves the hiring of a lot of people, purchase of goods and services, occupying real estate, etc. Even if the business pays zero taxes, it is still contributing in large ways to the economy of the host country. That's the thing that is ignored with all this talk of taxes. The largest contribution of business to society is the business itself and what it does. It's not the taxes paid.

High skilled labour, Low Taxes and Growth - you have to pick two

Why? They naturally go together. Ok, maybe I'm trolling a little here. But all this mouthing off in the thread about how industries should be paying their dues misses one really important point. In most of our lives, we have a choice what we do. Nobody is going to complain to me that I'm not eating enough at McDonald's or not drinking enough Coca Cola. These things are choices that we aren't expected or forced to make.

If there were a coercive monopoly on food or drink, my feeling is that the monopoly would use the same sort of arguments that governments use. McDonald's wouldn't just be a monopoly that you have to navigate two or three times a day. They would cast themselves as the food not just the provider of food. Any attempt to circumvent the monopoly would become an assault on our food supply not an assault on an abusive monopoly.

Government has the same sort of propaganda identification going. They're Society, Security, and Human Happiness all rolled into one. So if you fail to cough up your tax, you're nailing all of the above and are a bad person. But it's worth remember that government is just a group of people who have been handed extraordinary powers and delegated a bunch of duties (some important, some not important) which they provide as services.

This is important because ultimately the food supply is more important that most of what a modern government does. Yet aside from some modest regulation (mainly to make sure that nobody is poisoning anyone) and some subsidies, food production is disengaged from government. And it works just fine that way. We don't need a monopoly food supplier (and frankly would be very bad off if we had one).

And therein lies the reason why shopping around for better government is not such a bad idea. Governments need to provide some basic things: national security, a system of law, etc. But they often provide far more than that. They also vary in how effective they are in providing these things. Many businesses have a choice where parts of their business go. I think it quite reasonable for them to get the best deal they can.

Re:Of course... (1)

91degrees (207121) | more than 3 years ago | (#34296512)

It makes perfect sense for a company to operate in the country where taxes re lowest. Why do you think MS and Google have European HQs in Ireland in the first place? It's not exactly central is it?

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296610)

Why do you think MS and Google have European HQs in Ireland in the first place? It's not exactly central is it?

Great music, great beer and naughty women?

Re:Of course... (2, Informative)

Squeeself (729802) | more than 3 years ago | (#34296586)

As much as I agree with the sentiment, these companies are also publicly traded and have obligations to shareholders in. They're just playing smart by choosing the lowest cost areas to place offices. Yes, it would be nice if they'd all just sit and pay increased taxes, but if there's ever a good place to open shop, you can be sure they'll all jump ship without a second thought. So it then becomes a question: does the economic impact of the company in the area mean more than the taxes? Often times, it does...

supply and demand (1)

t2t10 (1909766) | more than 3 years ago | (#34296620)

There are tons of nations interested in having Google present. If Ireland wants to keep them, it needs to be competitive on taxes and working conditions.

Given Ireland's location and condition, in fact, they really need to be cheaper than other European nations. If Google is going to have to pay high taxes, they might be better off doing it in a place like France, Britain, or Germany.

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296674)

God forbid any company would actually contribute taxes to the infrastructure of the countries in which they operate. I mean, that would just make too much sense.

Translation: "I've never taken an economics course. Given the choice between two essentially identical services, I take the more expensive one. It makes too much sense not to."

Re:Of course... (2, Informative)

Totenglocke (1291680) | more than 3 years ago | (#34296692)

You clearly don't understand corporate taxes. If you want a good economy, you don't want corporate taxes - that's why most economists will tell you that the best policy is no corporate tax. Why? Because the lower corporate taxes are, the lower their cost to operate and the lower a price they can charge for their product. That means they sell more, which means they hire more people, which means they produce more....

Then there's the fact that, depending on the demand for a product, companies don't pay all taxes - there's always a portion that is shifted on to consumers in the form of higher prices (the incidence of the tax depends on how elastic demand is). If it's something deemed vital, like food, consumers will pay the full amount of the tax in the form of increased prices. If it's something less vital but still in high demand (say an iPhone), then it'll be split with the company paying some money in taxes and the consumer paying some in the form of a higher price, but not as high as if they were paying the full amount of the tax.

For every person who cries about the evils of outsourcing, which given your attitude towards businesses, I'll wager you're one, you fail to realize that the higher the corporate tax rate is, the more incentive companies have to move their operations to a country with lower corporate taxes. That was actually the primary reason why when Daimler bought Chrysler a decade ago they kept the global HQ in Germany - because Germany had a lower corporate tax rate than the US, which means that there were fewer jobs in the US (we lost out on jobs for building a new HQ and staffing it with secretaries, janitors, low level employees, etc) and less income tax revenue coming in than there would have been if the US had a lower corporate tax rate.

Re:Of course... (0)

Anonymous Coward | more than 3 years ago | (#34296712)

Ireland has been inviting companies with low taxes. It has brought money to Ireland. But now, their banking sector is driving economy down. And now EU is asking it to be less competitive to correct their economy?
It might be good to increase those taxes, but it should have been done when conditions were better.

ireland = end of right wing economics (3, Insightful)

Anonymous Coward | more than 3 years ago | (#34296238)

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 (5, Insightful)

Mashiki (184564) | more than 3 years ago | (#34296332)

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 (1, Interesting)

Anonymous Coward | more than 3 years ago | (#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!

Re:ireland = end of right wing economics (1)

Anonymous Coward | more than 3 years ago | (#34296598)

They are on the brink of defaulting because of the banks bailout; even if they had taxed corporations at 50% they wouldn't have been able to pay for the continued bank bailout out of their own coffers.

Re:ireland = end of right wing economics (5, Insightful)

im_thatoneguy (819432) | more than 3 years ago | (#34296414)

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.

end of right wing economics = wishful thinking (1)

DNS-and-BIND (461968) | more than 3 years ago | (#34296760)

Let's have a history lesson! Yay! Ok, what was Ireland famous for years ago? If you said poverty and unemployment, you're right! What is the Celtic Tiger famous for? High-tech jobs and money in the economy for everyone!

"Your" country (not sure who "we" is supposed to be here) could do a lot worse than copy Ireland's rise. Down with capitalism, comrade! To the barricades! Wishful thinking will surely change reality this time!

Call their bluff (4, Insightful)

Anonymous Coward | more than 3 years ago | (#34296246)

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?

Re:Call their bluff (0)

Anonymous Coward | more than 3 years ago | (#34296378)

"Tax havens" often collect as tax or other fees a small percentage of a large amount of income economically misallocated--generally in a manner arguably complying with legal technicalities--from the national or local jurisdictions with the talent, infrastructure and other resources by which it is earned. The benefits to the tax haven are often somewhere between the size of the small local business presence and the amount of worldwide income attributed to it.

Watch out Delaware (1)

BadAnalogyGuy (945258) | more than 3 years ago | (#34296254)

Here at home we've got our own little "corporate Ireland" in the pissant state of Delaware.

Given that so many voters there just sent a Democrat into the Senate and also picked a right wing moron over a centrist statesman to run against that Democrat, it seems there is a huge political battle brewing in that tiny little state. If they ever do decide to renovate their business laws, we may see a large number of companies incorporate outside the U.S. and we will be much poorer as a nation for it.

Re:Watch out Delaware (1)

Count Fenring (669457) | more than 3 years ago | (#34296306)

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:Watch out Delaware (2, Interesting)

Aldenissin (976329) | more than 3 years ago | (#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?

Re:Watch out Delaware (1)

Count Fenring (669457) | more than 3 years ago | (#34296406)

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 (4, Interesting)

laughingcoyote (762272) | more than 3 years ago | (#34296646)

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.

Fantastic opportunity for Ireland (5, Insightful)

Christian Marks (1932350) | more than 3 years ago | (#34296268)

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.

Re:Fantastic opportunity for Ireland (1)

davester666 (731373) | more than 3 years ago | (#34296342)

But banks keep the lifeblood of our society, namely money, flowing. Or so they claim. Of course, they are vampires, draining off much of it as it flows through them...

And to use a car analogy, banks would be the gas stations, but they would keep meticulous records of who they sold gas to, then, every night, go to their houses and siphon off some of the gas from their vehicles.

Re:Fantastic opportunity for Ireland (1)

Aldenissin (976329) | more than 3 years ago | (#34296362)

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 (0)

BadAnalogyGuy (945258) | more than 3 years ago | (#34296444)

How do you figure?

In the most simplistic case, a bank holds money for depositors. It uses part of that to provide loans to people who will use that money to invest in their business (say a farmer buying a tractor). The bank charges interest on that money, and the borrower pays back the loan plus interest from the profit he made from the investment (the farmer can farm more land and make more money). The bank turns around and pays some of that profit back to the depositors as interest on the deposit accounts.

That isn't creating something from thin air. That is the purest example of providing a service that benefits both the provider and the customer.

Re:Fantastic opportunity for Ireland (3, Informative)

CosmeticLobotamy (155360) | more than 3 years ago | (#34296532)

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.

Re:Fantastic opportunity for Ireland (3, Insightful)

Christian Marks (1932350) | more than 3 years ago | (#34296578)

It's called systemic risk--something that Bank of America and Merrill Lynch didn't manage very well in the events leading to the crash of 2008. Ireland should raise its taxes closer to the EU average and say good riddance to BoA.

Re:Fantastic opportunity for Ireland (1)

BadAnalogyGuy (945258) | more than 3 years ago | (#34296594)

While that is a risk, it is a calculated one, much like how your health insurance company only extracts a fraction of what you would pay if you had to pay for health care if you had a catastrophe. In the case that the bank does get overdrawn, the bank still has the option of turning to a lender for those funds.

That $250 isn't "from nothing". The bank doesn't magically have $1,250 upon loaning that money out.

Re:Fantastic opportunity for Ireland (1)

NoSig (1919688) | more than 3 years ago | (#34296596)

Yep, and it goes further when Bob purchases something from Celia for the money he loaned, and Celia then puts those 250$ in the bank. The bank now again has 1000$ that it can lend. The bank is required to keep a fraction of the money in reserve, so this doesn't continue into infinity money for the bank since the reserve fraction gets locked down again each time around.

Re:Fantastic opportunity for Ireland (1, Insightful)

Anonymous Coward | more than 3 years ago | (#34296548)

How do you figure?

In the most simplistic case, a bank holds money for depositors. It uses part of that to provide loans to people who will use that money to invest in their business (say a farmer buying a tractor)...

I believe the "thin air" part comes from allowing banks to lend far more than they have actual deposits on hand.

Re:Fantastic opportunity for Ireland (4, Informative)

Vaphell (1489021) | more than 3 years ago | (#34296658)

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%.

Re:Fantastic opportunity for Ireland (3, Informative)

Aldenissin (976329) | more than 3 years ago | (#34296662)

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 (1)

BadAnalogyGuy (945258) | more than 3 years ago | (#34296688)

Not to pooh pooh your fears, but linking to Edward Griffin isn't going to provide any gravitas to your argument.

Re:Fantastic opportunity for Ireland (1)

Aldenissin (976329) | more than 3 years ago | (#34296744)

What is wrong with Edward Griffin?

Re:Fantastic opportunity for Ireland (1)

BadAnalogyGuy (945258) | more than 3 years ago | (#34296788)

There are definitely arguments to be made that the reserve levels should be higher or that loans should only be made to better customers, etc. I'm just saying that Griffin probably isn't the guy you should be deferring to.

Curious... (1)

aztektum (170569) | more than 3 years ago | (#34296282)

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:Curious... (2, Insightful)

sumdumass (711423) | more than 3 years ago | (#34296458)

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 think they should do away with corporate taxes altogether. All money corporations make either go to the share holder by way of dividend, or is invested into expanding the company. Expansion of the company means more commerce which means more sales and more taxes on sales but it also means more jobs and more services and products that people can afford. Going to the share holder means income which means more income taxes and all perceived lost revenue outside of that which would go to foreign investors, could be captured by simple progressive income taxes with a small increase on income from dividends.

Zakaria: Something feels different this time. (4, Interesting)

theodp (442580) | more than 3 years ago | (#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."

Re:Zakaria: Something feels different this time. (3, Insightful)

Count Fenring (669457) | more than 3 years ago | (#34296350)

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.

Money money money (0)

Anonymous Coward | more than 3 years ago | (#34296292)

As recently posted on Slashdot:
* The joy of capitalism is the pursuit of narrow self-interest. That's why it works, and that's also why you don't solicit the people involved for balanced perspectives.

Now I didn't come up with that little gem of wisdom, but I kept it because, well, its a little gem of wisdom. The truth is, that Corporations are entities who by design make money for the people that own and control them. Its illegal for executives to do anything that decreases the money a corporation makes, except to buy things or pay for things that will make the corporation even more money. The boards who signed the letter to the Irish Government are rolling in billions (unlike the Irish Government). The boards would prefer to pay the Irish Government nothing. Its not just Ireland though. They aren't picking on Ireland, any other country in similar circumstances would be dealt the same hand. If the American Government weren't so Republican, then American taxpayers would pay less, and the corporations that make trillions in profits in the US would pay more, since they are making most of their money in the US. Thank a Republican for making corporate taxes lower, and personal taxes higher. The corp. may have a hard time paying the bill, but the private citizen? They would sieze his house. The private citizen has never been 'too big to fail'.

Corporate Tax Reduction Not Likely (0)

Anonymous Coward | more than 3 years ago | (#34296302)

It's being reported that Germany has backed off from it's demands that the corporate tax be raised, so any bailout from the EU/IMF will likely not include any mandate to raise the corporate tax.

Nonetheless the current government is almost certain to fall with or without a bailout as they put the Republic of Ireland into its current economic state while blatantly denouncing the opinions of the people.

Business as usual (3, Insightful)

HW_Hack (1031622) | more than 3 years ago | (#34296312)

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 (4, Insightful)

t2t10 (1909766) | more than 3 years ago | (#34296654)

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. (2, Insightful)

medoc (90780) | more than 3 years ago | (#34296324)

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.

Re:Let the Ceos settle where they move the compani (1)

Christian Marks (1932350) | more than 3 years ago | (#34296354)

On the contrary, outsourcing CEOs has been proposed [nytimes.com] before.

Re:Let the Ceos settle where they move the compani (1)

haruchai (17472) | more than 3 years ago | (#34296676)

Considering that CEOs seem to jump ship faster with more megabucks that they did when I first joined the workforce, maybe outsourcing them is worth trying, as long as their pay is tied to actual performance and not the virtual blowjob they give to the stock price by cutting staff.

Standard reporting income at lowest taxed country (4, Insightful)

Keruo (771880) | more than 3 years ago | (#34296328)

Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses.
Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.

We need to see the world's spreadsheet (1)

Christian Marks (1932350) | more than 3 years ago | (#34296490)

Google is using the standard "report income where tax is lowest" strategy in EU. Google has subsidiaries in multiple countries, and they can avoid paying more taxes by moving their income around as internal expenses. Subsidiaries appear to be barely breaking even, and mothercompany reports higher profit.

You make an excellent empirical point. It's not enough to make the across-the-board ideological claim that taxes are bad for business and that the taxes their employees pay more than compensate the state for ensuring that markets function under controlled conditions (this is one of the primary functions of the contemporary capitalist state--an observation routinely omitted from ideological claims on account of its empirical basis). The Telegraph article doesn't make the point that if Ireland raises its taxes, corporate leeches such as Bank of America and Merrill Lynch will have to cook their books somewhere else. It's not enough to accept what corporate spokepersons would like us to hear: we need to see the world's spreadsheet.

Time to pay the piper... (1)

Antony T Curtis (89990) | more than 3 years ago | (#34296336)

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 would not be worthwhile to move their operations elsewhere.

At the end of the day, it is bad for business when the government is insolvent.

Go ahead, move there. (5, Insightful)

Anonymous Coward | more than 3 years ago | (#34296384)

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 ... (4, Interesting)

postmortem (906676) | more than 3 years ago | (#34296386)

.. 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.

If you hear competitiveness, reach for your gun. (1)

sethstorm (512897) | more than 3 years ago | (#34296432)

...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:If you hear competitiveness, reach for your gun (1)

sumdumass (711423) | more than 3 years ago | (#34296510)

I'm not sure Ireland's or the EU constitution allows for governments to punish corporations unfairly while protecting others. In fact, this would pretty much put them in violation of many free trade agreements in which they are penalizing foreign trade within the country.

There would be many problems with your suggestions. None of these problems would likely help.

Re:If you hear competitiveness, reach for your gun (2, Insightful)

Rakarra (112805) | more than 3 years ago | (#34296616)

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?

Perhaps Google and company can bail out Ireland? (1)

lightspeedius (263290) | more than 3 years ago | (#34296454)

Couldn't this be possible?

Re:Perhaps Google and company can bail out Ireland (2, Funny)

guyminuslife (1349809) | more than 3 years ago | (#34296650)

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.

The offices (1)

iJusten (1198359) | more than 3 years ago | (#34296478)

Ireland's tax rate may be low in European terms, it is not when compared with locations such as Singapore, India and China.

But the companies are in Ireland because it's part of EU: they HAVE to have headquarters on the EU-area to do business there. There already is Apple Singapore, Apple India and Apple China (and probably rather same percentage of the rest of the companies listed), and they very well can't move their European operations there. If the taxes rise, the only thing Ireland has going for it is a large population of native English-speakers (and already having all the infra built on Ireland).

The rest of the states have tax of average of 26% and none under 20%; Ireland has 12% and if I understand correctly, USA has anywhere between 15% - 35%. The companies currently have extremely good deal, and even if the taxes would rise, the deal would still be very good.

Re:The offices (1)

harlows_monkeys (106428) | more than 3 years ago | (#34296660)

But the companies are in Ireland because it's part of EU: they HAVE to have headquarters on the EU-area to do business there.

Huh? Where I work we sell in the EU, and we do not have any offices or even any employees there.

Don't let the door hit you on your way out (0)

Anonymous Coward | more than 3 years ago | (#34296580)

Google warns Irish Government? Hey Google, I "warn" you: If you keep blackmailing European governments, then I'll make you leave every part of Europe that I control, starting with my PCs and networks. Fucking gangster corporations.

Taxation is the issue (2, Insightful)

Anonymous Coward | more than 3 years ago | (#34296584)

Ireland is part of the EU. Therefore it can export to the rest of the EU with impunity, no extra tax. Ireland leeches off the rest of the EU. Exporting from Singapore would have huge tax issues.

Re:Taxation is the issue (1)

mr_mischief (456295) | more than 3 years ago | (#34296778)

They could leave a shell in the EU and report most of the income in Singapore once the EU shell pays its support fees or whatever to the other subsidiary. This is the sort of trick they're in Ireland for in the first place.

The only solution I can see (1)

laughingcoyote (762272) | more than 3 years ago | (#34296698)

The only thing I see fixing this constant "We'll offshore! We'll offshore!" is the creation of a setup whereby you pay taxes on each dollar (euro, yen, pound, yuan, what have you) in the country where it is made, regardless of where it ultimately goes. Ensure that these massive corporations cannot cynically refuse to contribute to the upkeep of the communities who pay their massive executive bonuses.

But in the meantime, ignore it. If the leeches want to leave, let them. It may cause some short-term pain, but it'll also cause a return to more localized economies where money doesn't all take a one-way ticket out of your country.

Obviously, given the state Ireland is in, accommodating these massive corporations by quaking in fear they'll leave is not good for you in the long term. I could've told them that some time ago, but some people seem to think that "business is good" and that's all there is to it. These tend to be the people making the obscene profits, of course, or those who wish they could. Let them go.

What's with the crown icon next to the summary? (0, Offtopic)

Enter the Shoggoth (1362079) | more than 3 years ago | (#34296720)

Come on Ed's - who's the 'tard who can't tell the difference between the Irish Republic and the United Kingdom of England, Scotland, Wales and Northern Ireland?

Re:What's with the crown icon next to the summary? (0)

Anonymous Coward | more than 3 years ago | (#34296796)

Crown icon = government, not necessarily UK government

Wrong (4, Insightful)

happyhamster (134378) | more than 3 years ago | (#34296800)

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.

Ireland just needs to boil the frog (4, Insightful)

erroneus (253617) | more than 3 years ago | (#34296806)

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.

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