Good for them. France and Germany take endless steps to protect their domestic economic interests regardless of what any EU legislation or sense of fairness says, Ireland is well within their rights to do the same.
> France and Germany take endless steps to protect their domestic economic interests
It's not even that in this case, because it's not like there are serious European competitors to these companies (except maybe the odd Samwer clone here and there) that could even be protected. This is purely an attempt to rip these companies off, because the governments can.
The flip side of this argument is that the companies are ripping the countries off by using myriad tax loopholes, because they can.
I find it interesting that the companies are often portrayed as smart for doing this, but politicians are jealous and incompetent. Almost like we worship businesses and malign government. I wonder whose interests that viewpoint supports.
>I find it interesting that the companies are often portrayed as smart for doing this, but politicians are jealous and incompetent. Almost like we worship businesses and malign government. I wonder whose interests that viewpoint supports.
Megacorps have been systematically screwing people for several hundred years. By comparison, most of the book of Exodus is a story about government systematically screwing people. People seem to prefer the devil they don't know right now. The arc of progress is long.
I think many people here believe the correct thing for politicians to do would be focusing on making their own countries more competitive when it comes to having tech giants of their own, and they view regulations or taxes like this as being partially the result of 'sour grapes' that their own countries are less successful in this arena.
More competitive, OK. Who doesn't want their country to be more competitive anyway, whatever that means? Certainly no one in their right mind would argue to make it more diverse, more educated while we're at it?
How about you share how you think this could work? While I agree for more competitiveness for my country, history has shown me repeatedly that low taxes isn't actually working out that great.
Equating low taxes with increased competitiveness is to me dishonest as a generality. I'm certainly not opposed to admitting that it can work in some cases, but I can't agree to this as a general rule.
Why would it be lower taxes? All the major tech hubs in the US are in higher tax areas (by US standards). If lower taxes were the solution, you'd see Silicon Valley in Texas or Oklahoma or somewhere like that.
The rub is what “more competitive” actually means. I get the feeling lots of people think it means lower taxes, but limited government also hurts a company’s ability to hire educated employees if lack of funding hurts education.
If being more competitive meant lower taxes, Silicon Valley wouldn't be in California, it'd be in Oklahoma or Kansas or Utah, or some other GOP state that pushes lower taxes.
...well they did create these tax loopholes in the first place. That’s pretty much the definition of incompetence.
So are you arguing that corporations should pay more tax than they are legally required as a gift of charity to countries? If so, how much? What if a competitor decides to pay less?
The politicians in the US, Germany and France didn’t create the loopholes tech companies use in Ireland. The globalization of business is what allows maneuvers like the “Dutch Sandwich”. Taxation hasn’t really adjusted to this type of international tax avoidance. It will likely be a prominent discussion over the next 20 years based on the Panama Papers.
Corporates likely helped shape those loopholes, and viciously fought the legislation the entire way. Let's not pretend these corps are innocent victims here.
Ireland have already been given some lucky charms by the EU. For example, they were given permission to set their corporate taxes to a ridiculously low 12.5%.
It's an increasingly low corporate tax rate world. Ireland's rate is no longer as unusually low relative to other EU nations as it used to. The average EU corporate tax rate is getting close to being in the teens.
For example:
Hungary 9%, Bulgaria 10%, Lithuania 15%, Romania 16%, Croatia 18%, Poland 19%, Czech 19%, Slovenia 19%, UK 19%, Estonia 20%, Finland 20%, Latvia 20%
Even Denmark is at 22% and Norway is at 23%, traditionally high tax countries.
Outside the EU in Europe you have Montenegro 9%, Macedonia 10%, Bosnia 10%, Serbia 15%, Georgia 15%, Albania 15%, Belarus 18%, Russia 20%, Armenia 20%.
Another decade of rate competition and the EU average might be down to something close to 18%.
The real unusual stand-outs these days are the high total rate nations, like France, Belgium, Greece and Germany, rather than the low rate nations.
Regarding multinationals which might place their EU "tax address" in any of 28 countries, those countries which choose to set low taxation rates have (logically) decided they would rather attempt to have a low percentage of something than get a higher percentage of nothing at all.
Q: How many companies would site a corporate office in Luxembourg if there were no tax advantage?
Spoken like somebody who knows very little about the topic.
The effective tax rate is far lower than this, but also, most countries have an effective tax rate for megacorps far lower than what they advertise once exemptions, subsidies and tax-breaks come into play.
The difference is, that the Irish rate applies to any business taxing its income in Ireland. It doesn't have to be a megacorp, they do not have to have special relations to get subsidies or tax breaks. It may be your company, if your registered and operate it there.
Speaking as an Irish resident, I can tell you that this is effectively untrue. Indigenous businesses, or even businesses small enough to not get the sweetheart treatment of the relevant authorities definitely do not get equal treatment. The difference is vast.
Are you suggesting that indigenous and/or small businesses are taxed at a higher rate than the published standard 12.5%, or that they don't qualify for even better exemptions and thus lower effective rates than 12.5%?
GP was indicating that Ireland has one of the lowest standard corporation taxes at 12.5% available to everyone, not that there aren't even better effective rates offered to larger corps & multinationals.
Can you provide any evidence, as everything I can see shows 12.5% on trading income, and 25% on non-trading income.
Are you referring to the non-trading income corporation tax rate, or is there something else going on? If something else, that sounds an awful lot like corruption
That's not to mention the impact that the US tax system has allowing megacorps defer and arbitrate their tax obligations, which effectively lets them pay even less than that
The EU allows for free cross boarder trade and movement of assets within the EU. Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there. It's an automatic incentive.
There are rules here because otherwise it would be a race to the bottom. Each country wants Amazon, Google, etc for their employees' income tax.
The whole EU loses out from one state giving multinationals preferential treatment.
>> Having a lower corporate tax rate in one country means businesses operating in the EU put their revenue through there
I'm not sure this is true any more, at least not everywhere
"Amazon has become the first technology company to abandon controversial corporate structures that divert sales and profits away from UK in the face of a clampdown imposed by George Osborne.
From the start of [May 2015] the online retailer has started booking its sales through the UK, meaning resulting profits will be taxed by HMRC [the UK tax authority]. The group made $8.3bn (£5.3bn) of worldwide sales from British online shoppers but for 11 years all these internet transactions have been booked in Luxembourg."
Amazon and Apple have both been bitten by EU states offering illegally disproportionate "deals" to individual companies. These were deemed to be state aid by the EU and each member state (Luxembourg and Ireland respectively) were required to charge back-tax to correct the tax situations.
But there are still lower tax areas. This is still an issue that is not simple to unravel because flat tax was not a founding part of the EU, something we figured out after the fact.
Amazon, Ebay, and Google all put the vast majority of their earnings through secondary states within the EU, not the main markets. I'm not sure what Apple do these days, but they've just paid a couple of ~£200m in extra tax found from an audit. The others "claim" they are going to rectify this, but it's all face-saving. They're all lying tax cheats.
I meant to also point out that they said this in 2015 but from my reading of my invoices, and their various Companies House filings, Amazon EU Sarl is still the entity trading in the UK.
Their UK businesses are tiny. Warehousing and marketing.
Some people seem to assume that high corporate income tax rates are a good thing, but there's really no proof of that. We would all be better off if every country eliminated corporate income taxes entirely, and made the change revenue neutral by increasing taxes on high income investors and employees. This would encourage economic growth by eliminating resources wasted on tax accounting and avoidance.
Zero Corporation Tax allows multinationals to make huge profits and just chuck the money back home, even if that's outside the Union. Yeah, they're probably paying tax on it somewhere, but it's not taxed in the place it was earned. That's the problem here. Countries are losing cash and tax revenue to this.
Your trickle-down economics is similarly unproven.
I think the idea is that governments should tax things which aren’t as mobile (personal incomes, land, consumption etc) in order to minimise the distorting effects on the market tax can otherwise have. There are positives and negatives to that but it’s not totally obviously bad.
They don't. What Ireland has signed on, is that, just as in any EU country, the corporate tax must be equal for all. National or local governments cannot negotiate deals with specific companies. This is a promise they have broken, and the cause of all the noise about Irish tax.
Seeing so many people discussing this under wrong assumptions, even on HN, makes me sad and makes me think there's a very low ceiling on tax complexity, above which people lose track completely. This means we'll never be able to fix tax. Only tax lawyers will ever even begin to grasp it. It's also a pretty good argument against direct democracy as well as an argument for abolishing the corporate tax completely.
These conclusions are only yours. One could argue that although the ceiling could be pretty low, it's not something that is set in stone.
Besides, it's not like your alternative is any more appealing anyway. I'm not so sure about the absolutism of saying "oh, it's not perfect, so let's just abolish it completely to make sure countries get even less to subsidize healthcare and education".
Before implicitly calling other people braindead next time, maybe consider that none of us are 100% right and we are all just having a discussion.
Ireland's corporation tax rate is purely an internal matter, even in the single market. In fact, Ireland rejected by referendum the Lisbon Treaty in 2008, and only voted for it the following year after a series of clauses known as the Irish Guarantees were added. One of those guarantees is:
> Nothing in the Treaty of Lisbon makes any change of any kind, for any Member State, to the extent or
operation of the competence of the European Union in relation to taxation.
It's legally binding, and ensures that Ireland retained the right to set our its corporation tax rate.
All the other EU nations at the time (some have joined since) unanimously ratified the Irish Guarantees, so if anything, it's rich of them to now complain about an agreement that they willingly and knowingly signed up to.
Because it's in all these countries interest to avoid a race-to-the-bottom and being played against each other by companies that only need to move a mailbox to change jurisdictions.
For examples of the same mechanism: Amazon's HQ2 farce aptly shows what happens when jurisdictions cannot effectively coordinate and are forced undercut each other. Is there any doubt that Amazon would settle in some city and hire people and pay taxes without their little version of Hunger Games? So the net effect is simply some city being marginally better of but forgoing the jackpot that would usually come with being chosen, and therefore those citizens having to pay instead.
Plus the harm that comes from Amazon making decisions based on money alone, to the detriment of other factors such as quality-of-life for its employees.
That's why any trade deal includes provisions prohibiting subsidies not covered by a few narrow exemptions: they distort the competition and simply lead to losses in a zero-sum game between nations and private corporations.
This should help explain Brexit a little better. The EU is about giving up sovereignty. It may or may not be a fair trade depending on your POV. But people talk about it like the EU is a no brainer by looking only at economic grounds.
For me, the whole aspect on which the EU is a no-brainer is peace, and leverage against powerful lunatics and maniacs, like Trump and Putin. Which is precisely why the latter is hell-bent on dismantling it.
Was it wrong for the parliamentarians to fight the royalists in the first English civil war? Many lives were lost but the foundations of democracy were set and the monarchy weakened. The pragmatic view would have been to maintain the status quo that had worked for hundreds of years rather than the uncertainty of war.
Every person has their breaking point where mere pragmatism no longer holds sway. Peace, but at what cost?
To be honest, it's not about what people value. It's about what we have in practice. There hasn't been a war between EU countries for a while now, and that's something that I appreciate, given our history. Sure, you could argue that nuclear dissuasion is the reason why, but we don't even have any kind of cold war going on either, and I think the EU is to thank for that.
What's really good is that this creates a system where it's not only nonexistent, but it's also not even possible at all. It's like what Typescript/a linter does to Javascript: the EU greatly discourages entire classes of problems threatening the life/well-being of its citizens.
The leverage against foreign countries is a real pragmatic thing, though, not some ideology. Why else do you think Trump celebrated Brexit, and actively tries to break up different unions that we've spent years building, like NATO? I'm not saying that he's the devil, even though I'm not a big fan, but I understand that he's doing it to have his way with less opposition. Divide and conquer?
Because they are a member of the EU, a trade union that evolved into much more. They can choose to leave and also lose all their tech HQs that are only located there because Ireland is part of the EU.
But it does provide for rather strict limits on subsidies, and a subsidy is indistinguishable (or, actually, defined as, among other things) making one-off tax deals with individual companies.
All nationalistic jingoism aside, it's pretty hard to deny that Ireland reaped huge profits from EU membership. Considering it started as one of the poorest countries of Europe when it joined in the 1970s, subsequently received billions in direct transfers plus favorable conditions as outlined above, and today is among the richest countries in the world.
That's not to diminish Ireland's accomplishments in the least. The combination of a well-educated population and speaking (something akin to) the English language alone made them predestined to catch up eventually. Being able to engage with their former enemies in the Good Friday Agreement was also exemplary and undoubtedly returned fantastic dividends, both economically as well as morally.
But to deny that being part of the world's largest free trade block was an essential part, or to insist that when Ireland joined 40 years ago the EU was expecting, and motivated by, any short-term financial interests just seems...unnecessary petty?
Because there's nothing dishonorable in that story. Nor are those two aspects contradictory.
Germany does pretty well with an origin story far darker: not only to have started far lower than Ireland has ever been, and receiving far more support at a time where the idea of short-term returns were laughable (the Marshall Plan). But to have caused that same miserable situation pretty much single-handedly, and being the recipient of gratuitous support by essentially the same countries they had devastated in that mad crusade less than a decade prior.
+ "permission to screw over the other countries they're in economic union with by acting as a tax haven for transactions that occur in those other countries"
