> “This case was not about how much tax we pay, but where we are required to pay it," Apple said in a statement. "We're proud to be the largest taxpayer in the world as we know the important role tax payments play in society."
That’s a really beautiful example of spinning the story of what’s going on.
No, as your link says it wasn't. Only part of the taxes were paid when the money was repatriated:
> A provision allows for a one-time repatriation of corporate cash held abroad at a lower tax rate than what would have been paid under the previous tax plan.
I mean, tax rates can change over time. It seems like the goalposts have now been moved from "did they pay US tax?" to "did they pay enough US tax?".
You're free to argue that 15% is not a high enough corporate tax rate, but it is factually incorrect to say Apple did not pay US tax on the money they earned overseas.
> I mean, tax rates can change over time. It seems like the goalposts have now been moved from "did they pay US tax?" to "did they pay enough US tax?".
No, that is decidedly not what we are talking about. The claim was that holding all your money away from the US does not matter because the tax will be paid eventually. As we see, no it wasn't and the tax rate was not lowered because "taxes change over time" but because otherwise companies will just not ever repatriate their money.
It is factually correct to say that apple did not pay the full US tax rate on the money they earned overseas. You are free to argue that this is fine and they at least still paid some, lower tax rate, but this is the whole topic we are talking about. Apple pays very low tax rates and the EU, Ireland and the US are arguing whether this is unfair (state aid) and should change.
Perhaps you should re-read the comment I was replying to. The original claim was that Apple didn't pay US taxes at all. I simply pointed out that they did.
A temporary change in the tax rate during 2018 is, by definition, the tax rate changing over time. If a product normally sells for $50 and I wait until it's on sale for $25 to buy it, did I pay the "wrong" price? No, I paid the price the vendor set at the time of purchase.
Single board computers are numerous, mostly but not entirely at the low end, and no cabled interconnects is the defining trait of the class.
The reason we don't see as much of this in full-size desktops is because density is clearly not the objective and it would mean sacrificing the modularity and flexibility of established standards.
Or in other words, more expensive with no real gain besides aesthetics, which aren't worthless but I'd bet they aren't worth _much_ for a box which spends most of its time under a desk concealing its insides.
Their specs aren't great compared to competitors at the same price point, but specs are a small part of what makes up your desktop computing experience.
Add sales taxes on their products, payroll taxes on their employees, capital gain taxes on the dividends they issue.... and Apple is generating much more than 16% of their profits in government revenue vs. a world where Tim Cook closes up shop tomorrow.
I am aware, and I don't disagree. I don't even begrudge Apple for using this amazing tax scheme - they'd be foolish not to. But the argument that they're paying enough because they enable the government to milk everyone else in other ways seems entirely wrong.
They did choose to move to a tax haven though, while still going out of their way to to market themselves as being from California. It sucks they want to reap the benefits of being an American company without sowing their share.
Apple pays an effective rate of 21% on foreign earnings, 35% on income earned from cash invested outside the US and over $10bn in corporate taxes overall. That doesn't include property taxes, payroll taxes, VAT, etc, etc. They are the biggest tax payer in the world.
The conventional view is that Apple pays no tax, Ive seen that asserted on HN many times, but it's just flat out not true. If you wan to say the above isn't enough, sure, fine that's an opinion you're entitled to hold. I don't even necessarily disagree, I think there's a reasonable case to be made that we are excessively incentivising the concentration of capital but that's a question for voters and politicians not individual companies.
A company collects VAT from customers when they purchase. But it also buys from suppliers at a lower value. It pays the difference in the two VAT numbers (from customer-to supplier) to the VAT authority.
Arguably the customer pays all of a companies taxes, after all that’s where the revenue comes from. The bottom line is those taxes all come from the activities of the company.
This sort of silly emotionalism gets the conversation nowhere. If you can't write good rules to make companies give you money for efforts mostly done in other countries, what do you expect?
The law is the law and often times it’s an ass. Disgraceful verdict? No. You just disagree with it. What matters is the laws and regulations are applied in a correct manner. So, was the initial investigation inept? Possibly.
What this does highlight is that the law as it exists is arguably not fit for purpose, which is what many have been saying for a while, and that a reform of tax law across the EU is necessary.
Then you have to wonder why Ireland become increasingly wealthier as more US Multinationals poured in.
People in Europe keep saying these are "brass plate" operations -- however Google, Facebook and Apple all employ absolutely thousands here. US Multinationals are crucial to the Irish economy and tax base.
Irish media spinning this as a win for the irish people, while there are ongoing talks of increasing income tax on normal people to help cover the cost of this pandemic. Disgraceful.
No tax was owed to the Irish people from Apple. It was European commisson overreach. [Edit: been this comment is oscillating between -1 and 1 like a yoyo.]
It was hardly overreach by the Commission. They are entitled to ensure companies pay their fair share of tax, and that Member States don't undercut each other.
> tell me which normal company (people) pay sub-1% tax?
Which company are you talking about? Apple's tax rate in 2019 was 16%. They paid $10.5 billion in corporate income taxes.
The problem is the bureaucracy of the EU can't manage to fix their tax laws. With 27 members of the EU, and a broad spectrum of economic condition among them, there will always be nations that will benefit from very low tax rates. There is no scenario where the EU will ever fix their tax problems. Ireland is set to become one of the wealthiest nations in world history because of their corporate income tax rate, their GDP per capita is almost 100% higher than Britain and France now and that gap will keep expanding over time. Ireland is going to give that up? Not a chance.
Hungary is at 9%. What's the EU plan for dealing with that? Threaten them? Sanction them?
Exactly. This is not Apples fault though, since they are not responsible for tax laws.
The EU could have been a vehicle to solve that problem together, but since then I lost my believe it could enact change. Ireland has probably interest in large cooperation staying in Dublin and it might really be in the interest of Irish citizens too...
Still, the current situation is just a grave case of injustice.
Would you say that someone who finds a way to murder someone within the law isn't at fault in that murder? You're simply playing a game of semantics, they're still culpable of tax evasion, just not legally culpable.
Just because Apple have found a way to avoid tax, doesn't mean it's not their fault.
You might find some idiots who argue there's a shareholder requirement, but that's not the law either.
>Would you say that someone who finds a way to murder someone within the law isn't at fault in that murder?
This is a pretty ridiculous comparison. Murder isn't bad because it's illegal, it's bad because pretty much all ethical systems consider it a terrible thing to randomly kill someone. There's certainly a lot less agreement that a company is ethically obliged to pay a government a double-digit percentage of its earnings if it wants to sell people there things they want to buy.
No it is not ridiculous at all. What is ridiculous is the denial of the effects of the slow-violence of the ascendency of the rentier elite, and the subsequent plunder of the commons. [1] These rentiers pay very little taxes (if any) and park their illicit gains in offshore foreign tax havens. We are also in denial about the scary situation of the Precariat class, both in terms of the extreme inequality and class divide in global North (the USA, Europe, etc.) [2], as well as the divide that exists between the global North and the global South. [3]
The biggest factor of the ongoing plundering is the way the US empire enforces the corporatocracy's parasitic intellectual property rights claims:
"A globalised intellectual property rights system was immensely strengthened by TRIPS (Trade-Related Aspects of Intellectual Property Rights) passed through the World Trade Organisation in 1994, shaped by a few US multinationals, backed by the US and UK governments. This has facilitated the commercialisation, privatisation and colonisation of ideas. Since 1994, the annual filing of patents has more than tripled, with the global stock of patents close to 12 million, each giving monopolistic control of some idea for 20 years or more.
Many patents result from publicly-funded research, diminishing the risk. But TRIPS allows corporations to receive monopolistic income for two decades, or use the patent to block others from producing something. Those claiming to believe in free markets should have opposed the trend, but reveal their class-based ideology by keeping quiet. There is evidence that the patent system hinders economic growth and innovation. It merely increases inequality and rentier capitalism. George Osborne, as Chancellor, made it even more blatant with his Patent Box tax break that in practice benefits multinationals coming to Britain if they have patented products, particularly Big Tech and Big Pharma. That tax break merely accentuated the plunder of the intellectual commons." [3]
I absolutely see the systemic inequality (and precarity) caused by the artificial scarcity mechanisms, lobbied for by the corporatocracy, as slow-violence and murder.
I say all this with the hope that we shift towards social production/Commons-based peer production, with a revolution of the parasitic rentier business models on digital assets, which make no sense anymore in a digital society where information now has a (near)-zero marginal cost of reproduction and transmission: Protocol Cooperativism.
I just compiled a list with companies paying more tax willingly:
If companies were allowed to murder people, I would feel staunchly more endangered.... but seriously, Ireland has lash tax laws to lure these giants into their country, this is no secret, we have several countries within the EU engaging in similar strategies.
I didn't say that the amount of taxes Apple pays isn't morally questionable. But you would still need to complain to representatives, because they are responsible.
Well true, it would be unfair to put them all in one basket. But still, there is little use complaining about Apple (I don't usually hold back criticism here). We should hold those responsible creating these laws.
So how would I go about determining whether a company I want to buy from doesn't do unethical things to avoid tax? It's everywhere and nowhere.
For larger companies it's just a cost/benefit exercise - there are professionals and an industry built around making and executing these decisions. If the rewards are large enough, they'll do it. How can I, as a consumer, work out if Apple is paying the correct tax on the app payment I make in the App Store?
But equally not all tax evasion is on the scale of Apple's. There is plenty going on at the other end of the spectrum. How can I, as a consumer, work out if my local window washers are paying the correct tax on their cash payments?
I would argue it's virtually impossible for a consumer to establish these facts. And that's the way it should be - we ought to be able to rely on specialist agencies to enforce the rules.
It sort of is. And isn't. It's a helluva mess we've got ourselves into.
Ireland has built its modern economy on being attractive to multinationals. And it's worked. 10 MNCs alone pay 40% of all tax revenue in the country. They've brought jobs and wealth to a country that was previously big in dairy & emigration.
For the generation above me, the career path was study, leave, earn your money elsewhere - and perhaps come home one day to start a family. Perhaps. For the generation below me, they can go straight from Uni to FAANG (maybe FAAMG? I think msft are bigger than netflix in Dublin), startups, or elsewhere in the booming tech & pharma sectors.
Pandering to MNCs was a good strategy. It paid off. But it's not sustainable - no-one actually wants to win a race to the bottom.
I'm not sure biting the hand that feeds us is the best step to make right now though. We need to diversify first. We need to encourage home-grown talent. We need to wean the MNCs off their tax strategies slow enough that we don't startle them, etc.
Like it or not we are currently intertwined. That needs to be solved first - otherwise we just turn the tap off and return to the 80s.
(Yes I'm biased: I work for an MNC that probably wouldn't be here without this strategy. Without this strategy, I wouldn't be living here.)
I mean, a race to the bottom in the normal sense is cutting taxes or spending money on attracting these companies. We help these companies evade other countries' taxes, not our own.
Also, officially, the entities involved in the tax evasion are not related to the entities that actually employ people. Would Google move it european customer support offices without this tax deal? Theoretically, they could take advantage of it without employing anyone in ireland.
It's all horribly ambiguous. I've never really understood how it works.
It all gets terribly murky very quickly. For example, we often claim one of our strengths is that we have a highly educated workforce - but this is circular; people take this path because they know there's good work at the other end of it. If we ripped out those MNCs, that highly educated workforce would vanish quicker than you can say J1.
There are other benefits to being in Ireland. We have a common-law legal system, which is more familiar to Americans than most continental systems. We mostly speak the same language. We're still in the EU, etc.
How much of a presence you need here to make it work, I'm not entirely clear on. But it does seem apparent to me that once you're maintaining a presence anyway, it knocks down the largest barrier to actually building on that presence.
For example, it's widely assumed that Apple are only here for the taxes. I think they were originally here as a low-cost entry into Europe. But however it's worked out, last I heard Cork was the only factory (or perhaps the only factory outside the US?) that Apple actually owns. I'm typing this on an iMac that was assembled in Ireland. Apple are a success story - even more so because they're in Cork, rather than everything but everything being built in the Dublin bubble (a separate but very real issue).
And taxes aren't the only incentives; I used to work in a building that was sold to DEC (by the Irish Development Agency) for 1 Irish pound - which would have been $1.45 when we left the pound in the 90s. Not sure what it was worth when we sold the building, but .. probably still a close approximation of pocket change. And again, it paid off - it sounds like a story of us "bending over for the yanks", but the site passed through DEC to Gateway to HP to HPE. What started off as a factory for Digital is now stuffed full of developers for HPE. We haven't just had decades of employment out of that deal, but the value of that employment has been constantly rising. Ireland's modernisation is the result of thousands of such stories.
But as for a race to the bottom, it sort of is. Factories are being built in Central & Eastern Europe today, for most the same reason they were being built in Ireland in the 70s and 80s. Just as we were trying to undercut France, Germany & the UK to get our leg up - they're trying to undercut us to do the same. I do think there's a point where we need to "pivot" to actually acting like a modern economy, and let other nations take our rung on the ladder - instead of having to lay claim to one even further down.
I do agree with the idea that our modern economy shouldn't still depend on being a pseudo tax-haven. I just don't think "hit them as hard as we can" is the right solution, especially while we're still riding on their backs.
(To make this look a little less rant, I'll cheer it up with a fine example of a PDP that does not say Maynard on the front)
Yeah I think you're spot on with everything. I think some change in direction is needed for the long term but it's something we are not really seeing which is concerning.
The well known MNCs seem to be here largely in an operational capacity, the majority of their workforce would be something like trust/risk/support/finance/sales. In terms of "R&D" and "innovation", work that develops the products and services that are sold, I see very little of that happening in Ireland. Yet these companies have huge engineering and product teams in London which are still growing, and the fact they're not placed here is rather telling. For sure we've benefited from the presence of these MNCs so far, but for it to be more sustainable and for the economy to mature further I think we need to be looking to become a country that's attractive beyond being an operational base.
Admittedly not too familiar with the hardware R&D work going on here, I know Intel is largely manufacturing with a bit of development from things like the purchase of Movidius.
For the software side, what are those R&D departments actually working on? Would you really say it's R&D and product development? From what I can see, both from my own experience and from job posts, most of the engineering jobs are themselves operations related (SRE, infrastructure, customer support). I wasn't saying we don't have engineering roles in Ireland, but what we do have are not prime roles in terms of the companies products and services, and we should be looking to grow beyond facilitating company operations.
I can only speak for myself, but I’m in a group of ≈50 working on prime software R&D (as you term it) in a very trendy space in Dublin for a large multinational. I don’t want to say too much beyond that - and you’re probably right that it’s the exception rather than the rule - but it does exist.
If you work where I think you work (Irish founded company, office is about as central as you can get in Dublin) it's a great example of the type of thing we need more of! I really do think it's the exception unfortunately, even within the other parts of the multinational here.
What you have to realise about Ireland is that “ripening bananas” is considered an industry and is protected for tax purposes. You can be doing any idiot job and it becomes a vehicle for tax optimisation. Kind of makes it tough for tech people socially here cause a lot of people assume you’re on a scam or a useful idiot for somebody else’s scam
I believe the Austin plant is owned/operated by Flex / Flextronics. Although I see some news blurb that Apple are building a campus out there too, so perhaps that's going to change in the future? As I understand it, it's all contracted out in various places - save Cork as one very odd exception.
For the UK - possibly. The only product I'm aware of, is that they build configure-to-order iMacs. I have no idea how far they distribute from there, but I think it's a safe assumption that they don't maintain this facility just to ship CTO iMacs to Ireland. So I'd consider the UK a safe bet, and most likely most of EMEA. Could they be shipped from China? Most probably - my CTO MBP was. I have no idea what their reasoning is. (Although I'm almost certain it's not all they do in Cork - they have a second campus in the city centre, which wouldn't make sense for manufacturing.)
But for Cork being a foothold into the EU - Cork is their EU headquarters. The company operating there is Apple Distribution International Ltd, not Apple Inc. This is a large factor in how the finances are set up (at least as I understand it) - a mac sold in the UK goes on the books at ADI Ltd, Ireland - not Apple Inc, Cupertino. And this is how "Apple" ends up holding huge amounts of cash outside of the US. Their right hand is an American company, but their left hand is an Irish company. So the US only taxes them on funds held in their right hand.
If you're in Europe, and you have any email receipts from buying things from the mac/ios app stores - scroll to the bottom and check the address. There's a very strong chance it's not Cupertino.
While I'm on a ramble - I also find it curious that Apple don't have a single physical retail presence in Ireland. There's an Apple store in Belfast, but not in Dublin - despite Dublin having 5x the population. I have a strong suspicion this is not a coincidence either.
(I have absolutely no relationship with Apple other than as a customer - this is all just my understanding based on paying attention, and absolutely no inside knowledge. Obviously, else I'd be screwed right about now, eh?)
It's a race to the bottom as soon as any of those other countries undercut your tax rate to try to steal the MNCs back. Most countries realize that isn't sustainable, so for now it hasn't happened.
It could be. But they're only going to piss off the EU even more with these moves.
Right now Apple is probably winning a battle but might be losing the war. The next big EU mandate, besides tackling climate change, will probably be clamping down on tax shenanigans.
Next time they won't even be able to win anything as the law will be explicitly against such corporate maneuvers.
Are you sure? I think that countries that benefit from such schemes (e.g. Ireland, Netherlands, Luxembourg) can veto, sink such proposals before they land, or simply partially comply.
For instance, the Netherlands announced a withholding tax on royalties for 2021 "for cases where abuse is involved" [1] after international pressure. The way I read this is that they are building a facade where it looks they are complying with other EU regulations, but in reality it's business as usual. This way other EU countries have no appeal to these schemes as the Netherlands can say "we looked into these allegations, but no abuse there" and do nothing.
There are countries that benefit from it, and they can veto.
However, the reality is... realpolitik still exists. If Germany and France decide things should really change, what negotiating power do you think the Netherlands or Luxembourg or Ireland really have?
For example the Dutch economy is basically hitched to the German one, Germany can find a lot of creative ways to inflict a lot of pain on the Netherlands if it really wants to ;-)
Alliances vary according to the issue. Germany and France are often at loggerheads. France has a particular beef with with Ireland's 12% corporation tax rate but agrees with it on lots of other issues such as agriculture and the measures concerning the pandemic. Ireland passed up on a chance to join the Hanseatic league[1] because in some ways it is not as "Northern European" in outlook as he likes of Finland and the Netherlands.
"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014." [1]
The legality I believe. I don't think the Irish Government or Apple tried to hide anything, so the facts are out there in the public domain (Apple is a public company). More about the EC implying it was illegal, but that has now been overturned so all parties legally (if not morally, depending on your point of view...) vindicated.
If so the only part of the comment you were replying to above that was "overturned" was the word "illegal". Just wanted to make that clear, since I'm one of the people who think that it's still immoral and should be illegal.
Some countries including France and Germany have the concept of "Abuse of Rights" [0]. I don't know if it would apply in a case similar to Apple, but it can definitely apply when you're trying to find loopholes to not pay taxes.
Indeed. My understanding is that the deal is basically Ireland saying “hey Apple, employ Irish people in Irish Apple offices, and we’ll pass whatever laws you want to allow you to pay zero corporate tax in Europe, despite massive real (pre-fudging) profits.” And it’s not just Apple, it’s tonnes of US tech giants benefiting from this. It would be illegal if Apple got special treatment, which is what the original ruling found, but the appeal finds that all major US tech companies can access these loopholes, so it’s OK.
Working people in Ireland also pay high taxes on their income.
In Ireland you pay 20% income tax on the first €35,300, and 40% on income above this amount (if you are a single person, there are different cut-offs for married people and one-parent families).
You also pay an additional Universal Social Charge on all income over €13,000 - between 2-8% depending on your income level, or 11% for self-employed income over €100,000. Add on pay related social insurance (PRSI) of 4% too.
Don’t forget the ridiculous property prices and rapacious rental market. The skyrocketing unchecked insurance costs and the 25% VAT and the total of 33% tax on cars (VAT + questionably legal VRT). Ireland is only a low tax economy if you don’t live here.
The range starts at six percent (assuming full-time employment and minimum wage, it can drop lower if you are working part-time).
It’s at 15 percent for people earning the median wage (€3,300), meaning half of all Germans pay 15 percent or less of their salary in income tax. Your range if very far removed from reality. (It is true, though, that for very high incomes 35 percent aren’t the ceiling, that’s somewhere in the forties if you are making several hundred thousand per month.)
Well, adding mandatory payments/taxes such as, social security, health insurance (%7.45 + %7.45 paid by employer), unemployment insurance and solidarity tax, pushes it to 20 percent - 35 percent area, based on your tax class. I am not even talking about the church tax if you are religious. In my opinion, I do not see any difference between income tax and the mandatory taxes.
My net income/gross income ratio is 0.59, which means an effective tax rate of %41.
Are you sure about that they are not taxes? Those payments are decided based on a percentage of your income and are mandatory, which really sounds like a tax.
Mandatory insurances/payments are taxes in disguise, where you support other people directly for a specific purpose, unlike indirectly for a general purpose. Either way, the state gets the money and distributes it, just like a tax.
This case has nothing to do with income taxes. In Ireland we actually pay more than Germany with the additional USC taxes (which is essentially income tax in disguise).
I am Irish and perfectly fine with this being overturned. Irish capitalists will love it, Irish socialists will hate it, same as the rest of the World it depends on your personal prism. Overall seems the EC claim was weak enough to be overturned by appeal, so clearly not a water-tight case, burden of prove not strong enough:
"The EU's General Court said it had annulled that decision because the Commission had not proved that Apple had broken competition rules."
Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also leads to salaries, taxes and more investment in the community, to keep the economy going - instead we have a shrinking middle class, as the fuel is drained from the engine. Ireland, Luxembourg and certain other countries are complicit in this. We clearly need better tax laws to combat this, but I'm glad the commission is trying to fight this to the extent they can within current laws, and I hope they win the case on appeal.
>Transfer pricing and tax havens are draining money out of the economies of most European countries, breaking the virtuous cycle where consumer spending also leads to salaries, taxes and more investment in the community, to keep the economy going - instead we have a shrinking middle class, as the fuel is drained from the engine.
An alternative interpretation is that the high degree of taxes and regulations in Europe is preventing the growth of new companies there, resulting in fewer jobs, opportunities and investments. If Apple was a European company Europe would be getting a lot more taxes from it. In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China).
What are the benefits of a fortune 500? Who are the beneficiaries? The main ones would be investors and management, including a subset of employees. Given the tax loopholes that are often taken advantage of, I would hardly say that the countries or cities they reside in are beneficiaries in as far as tax income, though they definitely have a hub effect of drawing people into the locations they are in. Whether that is beneficial for original inhabitants is debatable, given gentrification and increased inequality of those who the city warps around to serve, and those who serve them.
On the other hand, Europe has lower inequality amongst citizens, and an argument could be made to say that this increases happiness. What they are missing out on wrt fortune 500's is creativity that creates new technologies that pushes boundaries and revolutionizes the world (perhaps an oversimplification of the argument). Though they may not be at the forefront of this, it would be inaccurate to say that they do not benefit from innovations occurring in the world.
My argument is that they currently occupy the coveted position to benefit both from the inequality of other countries yet retain the benefits of a more equal society. Viewing the entire world as an unequal society, the winners would be the ones at the top of unequal countries, followed by the equal countries, with those at the bottom of unequal societies trailing. Ideally the entire world would all have equal societies, but in no situation would I think countries with equality strive for the benefits of those with unequality
As long as there is shareholder before stakeholder, I don't see this as a good argument.
Take Amazon. Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be.
What Europe would need is to excel in computer science as well as design and engineering. The topic is pretty lacking here and would need a push.
The result would be companies that could deliver experiences equal to the US or better. Take Facebook, a European version with the data protection laws here would be infinitely better.
> Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be.
same old argument that marx has - that capital ownership (and by extension, capitalism) is the cause for such inequality.
I personally don't think all inequality is the same, and inequality is what drives people. There's a reason why communism, and their strive for equality, has so far failed as a form of governance, and as a form of market economy.
Does inequality drive you? Personally, I don't work because I want to enjoy more goods, services, or life stability than my friends or family. I work because I want to be able to afford my own health insurance and pay my own grocery bill. I don't think my interest in doing that is really a function of anyone else's insurance or economic status.
Absolutely!
If there is no inequality there is no profit for working more. If I can't earn more by working more then I'll just do the bare minimum and still receive my equal share.
Luckily I never lived under a communist regime to witness it, but I've seen this happen in companies with middle managers who don't care: a few employees start working very little, a few more follow suits, motivated individuals complain, see that nothing happens and then start slacking as well.
I feel like this argument lacks a full understanding of what 'net worth' even means.
Bezos is not taking enough cash from Amazon to be even remotely relevant to what they pay their warehouse workers. His cash compensation in 2019 was 1.6 million. Not sure how that reflects in 2020, 2021, but the point is that Bezos is only absurdly rich in theory He is theoretically worth hundreds of billions- but his actual consumption of goods, services, resources is a tiny percentage of that.
There is no direct link between Bezos net worth and allocation of resources to laborers, and attempts to paint that picture are misguided.
You criticize Amazon for their 'low paying' jobs- do you really understand the space these jobs exist in? I've worked warehouse gigs in college. I'm sure the Amazon jobs suck- but their minimum wage is what my supervisor got paid at a small building supply company. Amazon is actually considered a high paying gig in that arena.
More likely if factory workers got better wages then prices of goods would go up, demand would go down, and some factory workers would no longer be needed. Amazon doesn't have the luxury of deciding it doesn't want to create value for it's shareholders, and I'm speculating widely, but I'm guessing the marketplace (B2C) aspect of the business is probably operating on much slimmer margins than the cloud aspect (B2B). If they were to subsidize the marketplace with cloud profits, it would be anti-competitive. They would be operating at a loss which would prevent competitors from being profitable and competitive.
They then also can hire a better class of workers, leaving some working there now no longer working there. And as prices go up, everyone loses some value to buying these goods, which is then less to spend on other things.
When a worker is willing to work for some wage and an employer is willing to pay it, both sides benefit, and society as a whole is not paying extra.
> ... profits go down
As does innovation which is paid for from those profits. And outside places, such as teacher pensions, 401ks, union pensions, state pensions, all lose money too. Taking this money from those who funded Amazon via stock purchases and secondary markets would ensure that later there is less investment available for new companies, now jobs, new industries.
Stock markets lets companies get capital to grow and usually employ more people. Taking out these incentives means less companies and less jobs, which means less competition among employers to hire people, which means less wages.
Doing things inefficiently, such as paying lots more than needed to clear wage floors, or paying a worker to do one task instead of two, or similar, means less value in society overall than if the things were done efficiently.
Nobody who argues “Billionaires are bad for society” has an understanding of net worth - or worse, they are acting blatantly disingenuous in order to further their political viewpoints.
Keep in mind that the employees in Amazon warehouses are there of their own free will. So, however badly they are treated, Amazon is apparently providing an option to them that's better than any alternative they may have. Surely, that's better than them not having the option to work at Amazon at all.
In made up worlds they could work for magic company and make trillions of dollars a year, I'm sure.
In the current world workers choose to work there.
There are usually many other choices available that were discarded by those workers. What if all replacements were just like those numerous other companies that the current workers didn't choose? That seems more likely than some company appearing that gives them vastly better options.
>What are the benefits of a fortune 500? Who are the beneficiaries? The main ones would be investors and management, including a subset of employees.
Workers are also a pretty big beneficiary: look how well workers at recent Fortune 500 entries like FAANG are paid. Even after accounting for subsidised health and education benefits the average European developer is still lucky to earn even half of what the average US developer does. Sure it's noble for Europeans to want more equality but I don't think policies that reduce salaries are a good way to do that; better to lift the worse-off up than pull the better-off down.
European developers don't need to live in areas though, where they have to pay 2 million dollars for a house and they have social security and health care. This lessens your argument.
Social security and healthcare is definitely awesome, but have you checked house prices near big German cities like Munich? They're much closer to Bay Area prices while salaries are very far away.
Europeans who keep tooting that "we don't need US salaries" tend to be the more privileged ones who will also inherit a house from their boomer parents and take it for granted, so they don't feel the stress of the rat race with skyrocketing house prices and income inequality.
So no, we DO want better paying jobs and lower taxes otherwise we'll go back to a feudalistic society where a select few own the housing and means of production through inheritance and everyone else and their offspring will forever be stuck working for the upper class so they can consume their products and pay them rent.
In most of the US, learning leet-code offers one a meritocratic lift up to the upper class while in most of Europe(except the East) it does not.
> have you checked house prices near big German cities like Munich?
People generally don’t buy but rent and the rental market is set in such a way as not to gouge people. Still expensive but salaries are relatively high and in all other respects costs of living is very reasonable
> while in most of Europe(except the East) it does not.
Wait, something doesn't add up here. I see many programmers migrating from eastern to western Europe, but not the other way around.
It is true that programming as a profession will offer comparatively higher standard of living in eastern Europe (when compared to other professions), but that's because the overall standard of living is lower than it is in the west.
A lot of people move from Eastern Europe to Western because the political (Russia, Belarus, Ukraine) and LGBT (Russia, Belarus, Ukraine, Poland) reasons, not money.
I'm aware, but that's not related to my comment, unless you're actually claiming that programmers have lower standard of living in the western Europe compared to eastern Europe (which I believe to be false).
Belarus, Ukraine, Russia have low taxation for the salaries in IT (https://en.wikipedia.org/wiki/Belarus_High_Technologies_Park) To have your own 2-3 room flat in Minsk (Capital) by the age of 35 is pretty common for Belarusian programmers and basically unheard in the West. So yes, I can argue that programmers can have higher standards of life at home than your typical "tech hub" like London, Munchen or Dublin.
Not at all. By far the biggest engine of emigration is money. In my country (Romania) there are millions of people working in western Europe (2 million in Spain, 1 million in Italy, probably something similar in the UK + Germany + France). A large number of them are parents who leave their children at home and work for most of the year there to gather money.
Even if you're talking about just software devs, people still move to the west for higher salaries, though I believe there is more movement towards the US, especially since the software industry has a lot of local branches of US companies.
But I can tell you from the ground that at least the common perception is that you are generally going to be wealthier as a software developer in western Europe than in Romania, even though in Romania software devs tend to be much better off than the majority of the workforce (and even though software devs in Romania don't pay income tax on their salaries, which is a nice 15% rebate).
I was saying 1M between UK, Germany and France. Most likely today there are fewer, because of Covid19. Brexit hasn't lead to repatriations, so no large change caused by it I believe.
Even if it's half cheaper, a family house of 80-100m^2 costs beyond 600K which is way beyond affordability range of a couple both working as software engineers let alone people with non-tech jobs.
Why is that? Like, on the US west coast, ballooning home prices makes sense because their cities are in valleys with a fixed amount of land, but munich looks like it has a bunch of farmland around it that could be converted into housing increasing supply and thus decreasing prices. This coming from someone in chicagoland which has 9.5 million people but housing isn't crazy because the metro area sprawls 30-40 miles out into what used to farmland.
Because Germany is mostly old money, inherited for generations, that is very risk adverse so instead of investing it in new SW companies or buying stocks, they park it in real estate in desirable areas and prop up this bubble since it's a sure bet for a return on investment. That's why they call it Beton Gold ("concrete gold").
Munich has very strict limits on vertical height so that cathedral spires aren't drowned out by the buildings. On the edge of the city you do see some taller office buildings but not in the core, and certainly not to the extent you would expect in a major city.
Low interest rates certainly allow you to afford a more expensive home, but inflation adjusted price per square foot isn't actually skyrocketing for most of the US outside of the west coast [0]. For example, Dallas/Fort worth and Houston metro populations, the 4th and 5th largest in the US have both grown a whopping 19% in the past decade and prices aren't skyrocketing there. But they have plenty of land surrounding their cities that can be developed to increase the housing supply.
It just seems weird to me. Why are people paying such high prices when there is farmland so close by that you could buy and use to build some condominiums, townhomes, duplexes or even single family homes.
With mortgages in the 1.5-2% range, a 600K house would cost you €750 - €1000 a month in mortgage payments, and that's not even taking into account tax benefits you may get. That's an absolute steal compared to what you would pay in rent in a place like Amsterdam or London.
Yes, but renting doesn't give you that sense of security when you are thinking of having kids versus owning your own place. When you're renting the thought of the landlord kicking you out if the rental market should suddenly shift is a huge axe to child planning for most couples. Owning you own place offers a more secure feeling and belonging to a community.
From my experience there's plenty of 'sense of security' when renting, mostly coming from very strict pro-tennant laws: Limited rent hikes, no eviction unless the tenacity agreement is breached, etc. You can't just throw out of your home because someone wants to make a quick buck, you're protected as you should be.
This is pure make-belief. You should buy if a purchase is cheaper than renting. Guess what, it never is when interest rates are at zero.
Rent is determined by what people with jobs can pay, property prices are determined by what international investors with deep pockets and easy credit can pay. Which one are you? If you are the former, you will be paying down a mortgage that you can barely afford. You will be a slave to the property. What if you lose the ability to pay? How secure is your paycheck really?
Keep your cash, and invest it somewhere else. You can find a new place to rent. You can leave if your community turns to shit.
property prices are determined by what international investors with deep pockets and easy credit can pay.
The international investors with deep pockets own very, very, very few properties compared to regular people.
What if you lose the ability to pay? How secure is your paycheck really?
What if you lose the ability to pay rent? How does that make you any better off?
Keep your cash, and invest it somewhere else.
I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property. If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.
You can find a new place to rent. You can leave if your community turns to shit.
You can also sell your house/condo and move somewhere else, at any time.
Not to mention, you'll still be paying those same mortgage payments (unless you refinance) a decade or two from now after the market has changed, and generally it goes up (even if it should only average going up by the amount of inflation).
I bought my house 6 years ago. Rent prices have gone up about 30% in that time. I used to think my payment was crazy compared to renting, not I know of people renting much worse locations that are paying more, and I'm about to drop the mandated PMI because I dropped below 80% of the principal left to pay, so my payment will go down be a couple hundred more.
> The international investors with deep pockets own very, very, very few properties compared to regular people.
Doesn't matter, a rising tide raises every boat.
The point is that property prices have diverged from rental income, because low-interest credit from around the world is chasing properties, while stagnant wages imply stagnant rental income.
> What if you lose the ability to pay rent? How does that make you any better off?
I don't have to foreclose.
> I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property.
Between a third and a half? That sounds like a lot.
> If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.
So you're saying your mortgage payment, taxes, insurance and upkeep is equal to rent? Where the hell do you live?
> You can also sell your house/condo and move somewhere else, at any time.
Renters in Munich have very good protections. You effectively cannot be evicted without cause (and evidence), and most contracts are indefinite length (unless you are explicitly looking for <1 year).
> Today, Munich is Germany’s most expensive city in which to buy property, with asking prices reaching €35,000 per square metre in some exclusive developments, according to Engel & Völkers. The average price per square metre in the city is €7,630, dwarfing the €2,993 in Germany as a whole. [0]
That's wild. In USD per square foot, that's $3,700/sqft, $800/sqft, and $316/sqft respectively. Meanwhile, San Francisco's median is $1,100/sqft, the metro area's is $500/sqft, and california's as a whole is $315/sqft, remarkably close to germany as a whole. America's is $123/sqft.
Thank god for SF salaries (apparently about 150% of munich salaries).
The causality is backwards. European developers are unable to bid 2 million dollars for a house, which is why they're still cheap (compared to the bay).
Give it time though! The Dublin NIMBYs scream and shout anytime anyone tries to build anything, and then wonder why only tech workers can afford to live in the city centre.
The US Bureau of Labor and Stats says the total number of Software Developers in the US is 1.4 million. Only about 475k (1/3) live in high COL states, California, Virginia, New York, and Washington.[1]
The median salary is about $106k a year which isn’t too far from €100k a year. I am not sure if these wages include non-salary comp.
> better to lift the worse-off up than pull the better-off down.
Given a fixed amount of resources, this isn't a choice but a matter of fact. You cannot do one without causing the other. This then becomes deciding what the lowest level you're comfortable having your fellow countryperson living at with the requisite cost to those with the means.
People don't consume resources, they consume goods and services. The IPhone is valued at a much higher price than the sum of raw resource components it contains.
Economic growth is what allows us to increase the amount of goods and services people can consume from a given set of resources. Economic growth is why a single farmer with modern equipment can produce more food than a hundred subsistence farmers could a few centuries ago. Economic growth is why we can have real-time high-definition video conversation with somebody anywhere in the world.
The more obstacles we put in the way of growth, the slower we improve our productivity, the slower we grow the amount of value we can extract from the resources we have.
Using resources as a blanket term to describe goods and services as fungible with a market that can trade them, it's probably a better descriptor of available goods and services that can be consumed instead of the fluctuating cost of said goods and services. True we could produce more goods than we have before with a lower cost, but it isn't true that this enables us to provide more to those without means as this would impact markets and thus profitability of the producers. This is a reason why farmers dump milk and eggs into fallow fields. If they wouldn't do that and instead provide them to those without, it would break the market.
I would counter that it isn't economic growth that enables the technology of today, but technical innovation that drives economic growth that enables either larger populations or a more wealthy population. Given unequal societies, economic growth is only beneficial for those who are already benefiting from the system and serve to increase inequality, but given an equal society benefits all. Therefore instead of worrying about economic growth, I propose that we invest in technical innovation that will drive economic growth as a byproduct and legislate for a more equal society to benefit the most amount of people.
> Given unequal societies, economic growth ... serve to increase inequality
that's not true. Especially if you view it from the angle of absolute poverty.
I wouldn't care that Bezos has another bazillion dollars due to economic growth - because with said growth comes more economic opportunities for the poor. Where once they had no economic value, there could be from being an amazon deliverer.
Where once there was no economic value as a subsistence farmer, the outsourcing of labour has generated economic value for underdeveloped nations. SO much so that China is now threatening the hegemony of the USA!
The poor never had no economic value to begin with, the question merely becomes who is the latest in the line of exploiters. When they have no power and no leverage they are forced to work for peanuts in menial jobs that can just as easily replace them. In an increasingly automated society the lowest tier of human labor slowly resembles replaceable cogs; how much would a business pay for those?
Economic growth does lift all, but in an unequal society disproportionately lifts those who are already well invested in it. It will barely improve the lives those at the bottom with no equity in the market, perhaps with slightly better consumer-grade technology, but nothing in terms of income, social safety, or health that comes with climbing out of poverty.
Economic growth and technical innovation go hand in hand. As the economy grows the pie gets bigger, as long as everyones absolute amount grows thats good - most people thing that some are shrinking which is not the case. Right now, some peoples are growing at faster rate.
Firstly, one can have innovation with no economic growth and vice-versa, the two phenomena are distinct and separate. Much of econonic growth is about organisatuonal aspect's of society, rather than inventing new technology. Technology depebds on world of atoms, ans discoveries do not come on demand, nor are they particularly well rewarded. Einstein did not die a billionaire. Neither did most great scientists.
Einstein didn't develop technology, he was a scientist. Science != Technology, but Science and Technology and are linked. Often times technology precedes the science, and then the science is developed and advances the technology.
What does this mean? Are Computer scientists developing technology?
All technology is a science, i think you are trying to draw is the distinction between fundamental science that discovers laws of nature, and indutrial kind that figures out the best process for manufacturing stainless steel.
>> "Often times technology precedes the science,"
This can happen by freak accident, but generally science has to find and researched some law of nature before you can take advantage of it to develop some product or manufacturing process.
I completely disagree - increasing total wealth allows new things and is more important than how people judge their wealth relative to others.
People are not equal in many ways - I don't see why we always focus on wealth. What about influence, what about looks, what about education, what about family life quality, etc...
I completely disagree - increasing total wealth allows new things and is more important than how people judge their wealth relative to others.
You just restated your opinion without providing any new arguments.
> People are not equal in many ways - I don't see why we always focus on wealth. What about influence, what about looks, what about education, what about family life quality, etc...
FANNGS, by definition, are 1% of the Fortune 500. In term of headcount, it's even lower. They should not even be part of this argument. You can't base taxation policies around the personal experience of hyper-specialized, in-demand trained professionals.
Fortune 500 no1: Walmart. no2? Amazon.
Are you arguing that those kinds of companies have a upward pressure on salaries? Because at least in the case of Walmart and Amazon (excluding AWS), it's proven that it doesn't. And in terms of workforce, the low-pay employees that those companies hire overwhelm "well-paid" engineers from FAANGS a 1000-1. And that's not even accouting for all "red badge" contractors not lucky enough to get a cosy position at those FAANGS, who don't appear in the company's salary statistics, and are not in such a good financial situation themselves.
If I use the S&P 500 instead (easier calculation given available data for me), the the FANG is a huge portion. (Yes, 5 companies out of 500 are by definition 1/100.) No argument about headcount, though.
Take a look at the second chart (bottom of "Page 1", the third actual page considering the title page and contents page). [0]
Revenue may be small, but profits are huge, and market capitalization (aka "wealth") is absolutely massive. And that market cap is what feeds retirement plans & pensions. So while Europe is taxing people, the US is growing profits and wealth.
The World Economic Forum had this to say about Europe's tech giants in 2017: "In total more than a third of European tech founders are based in the UK." [1] That doesn't bode well for the future, when your economy is stuck in old industries, and the leader is leaving the party.
BTW, hats off to the Finns - not sure what they are doing with gaming, but they punch well above their weight.
When it comes to creating wealth, taxation doesn't do anything but redistribute it. In order to actually generate wealth, you need capital, and people who use that capital more efficiently & effectively will become richer. It is a virtuous spiral. And what's important is that every one of those high paying tech jobs is one less low-paying job. Most of the low paying jobs have existed for decades in various industries (esp retail), but most of those tech jobs didn't exist 20 years ago. I can only imagine how many high paying tech jobs there will be in the US in 20 more years, even though I expect low-paying jobs to still outnumber them.
"Most of the low paying jobs have existed for decades in various industries (esp retail), but most of those tech jobs didn't exist 20 years ago."
How many low paying jobs are taken by e.g. a high paying e-commerce job? Hundreds surely. And if there are less low paying jobs you can pay someone less to do them because there are so many people looking for those few jobs.
> When it comes to creating wealth, taxation doesn't do anything but redistribute it. In order to actually generate wealth, you need capital, and people who use that capital more efficiently & effectively will become richer. It is a virtuous spiral.
Sure, it's a virtuous spiral if you're one of the minuscule number of people that the spiral is pointing to. Otherwise, you see it for what it is, wealth being siphoned from Us to Them.
Also, the level of political control that huge companies almost automatically exert greatly minimizes democracy, leading to things like the bottom 50% of Americans having almost no bearing on the political sphere, at least at the federal and state levels.
Do you actually believe that? How much money will I get from 1 share? How much money would I have to invest before my fortunes actually rise with the real fortunes of any particular company?
That is the principle and it works. I know countless examples, yes, including me.
Not happy with 1 share? Save more, buy more.
Want cheaper shares? Found your own company and you’ll have infinite shares for free. You’ll have to make it successful afterwards, though, to raise each share's value up from 0. That’s what "They" did.
> Save more, buy more.
> Found your own company and you’ll have infinite shares for free.
You seriously misunderstand how little money people at the bottom actually have, and how little access to the kind of credit you'd need to start a business. Like, saving for a car when their old one breaks down will probably take some people months or years. Saving to buy shares????
> That’s what "They" did.
A minuscule handful of them, if even that. For every Jack Ma there's a thousand Mark Zuckerbergs or Bill Gatess who were born with a silver spoon and will die with a silver spoon, as will 3 generations of their children at the very least. The descendants of the people who laid the railroad tracks, the large slave plantations, all of these people are the vast majority of the top. Even people like Elon Musk are still coming from a background of pretty high privilege. The people who were born in the bottom 50% that you have ever heard of (outside show-business) can probably be counted on at most a few people's hands.
You don't need a line of credit to start a business. You just need desire to work and ingenuity. People are more than happy to give you money if you are willing to do the work. There are countless rags-to-riches stories from all over the world.
But first you need to change your mind set. With self-limiting beliefs like those, you'll never get anywhere. Not only are they patently false, they don't help you in any way.
Get out of your echo chamber, hang out on same entrepreneurial forums (like this one!), read some inspirational books, learn how much is possible if you're just willing to try.
For every story of entrepreneurial success, there are countless others of failures. The vast majority of people are not just too dumb to see the opportunities, as you have arrogance to imply. They are well aware of the risks, and can't afford to take them.
Plus, an economy can't run on business founders alone. It requires workers that actually, you know, do the work, and who are willing to be paid for a less than that work is worth (you know, 'profit').
If anyone is living in an echo chamber, I assure you it is not the 99%. It's the smug 1% hoarding wealth and justifying it to themselves by thinking 'anyone could do this if they were as smart/hard working/enlightened as me!' while forgetting the luck and connections and old money that got them where they are.
So you really believe that everyone can become rich if they just put in the hard work? That's such a naive view that I don't even know where to start to debate it.
This reminds of a joke about drawing an owl: you first draw 2 vertical ovals, slightly superimposed, one bigger, one smaller. Then you draw a triangle on the smaller oval. Then you draw the rest of the owl.
Sure, you can't succeed if you don't try. But you also can't succeed if you don't have anything to eat, and for the vast, vast majority of people, trying is likely to make that a real problem.
My belief is that not everyone has the same opportunities for a variety of reasons and even if something might work for me it might very well be impossible for others.
I also believe that it is our duty as society to make sure everyone can have a decent life even when not granted the same privileges others get for free.
Assuming everyone can put in the hard work and make it, you imply that everyone has or can learn "quickly" a markeatable skill, including the business acumen, the available free time and the mental/physical health required to succeed.
But the real issue is that even if everyone was able to try to get rich starting on an equally levelled field, our economic system can't allow everyone to succeed. We need poorer people to do employed jobs in order for their value produced in "excess" to be sent to shareholders and CEOs.
It just seems madness to me to have this global competition where the poor race against each other in order to be allowed to become one of the rich. We can do way better than this.
Best way to make raise employee's wages: competition between employers. For that we need more employers. For that we need more startups. For that we need more founders and entrepreneurs.
One way to encourage those people while also redistributing through taxation would be to reduce or eliminate corporate taxes but increase personal taxes, especially for the wealthy.
There would be lots of knock-on effects from this, such as more company perks to offset the large taxation of salary, but there are ways to combat that (tax benefits provided to employees as compensation). This would allow companies more capital to invest in R&D or expansion. Some of that money would go to higher wages (but if you distribute taxes more heavily to the wealthy along with this, it wouldn't affect median employee salary much).
A downside (among many, I'm sure) would be even more concentration of wealth in companies which might be used for non-free market operations, such as lobbying. It's all interconnected, so it's complex, but it also doesn't feel like we're in such a good situation socially, economically and politically that we should refrain from making large changes like that.
Agree. The most pro-Wal-Mart economists will tell you that Wal-Mart as a firm has boosted the US economy by at least 1% of GDP, by being more efficient, and forcing its competitors to be more efficient as well. Suppose for a moment that we accept that claim uncritically -- it is still very clear to see that these gains do not accrue through the vehicle of employment. Indeed, the non-logistics savings from Wal-Mart comes in no small part from reducing the number of workers involved in retail. As with many economic situations, the losses are simply concentrated and obvious, while the gains are diffuse and spread across many transactions from many shoppers. In this case, the gains accrue as part of every grocery-store transaction in the country (and particularly to the poorest in the country, who are most price-sensitive).
One can hold many opinions
about the matter, and one can dispute that there is a net benefit at all, but it is clear that referring to this as "good for workers" is not particularly enlightening.
Your point is often missed and I wish it was stated more often. However, I think the current sticking point for many is that, while their wage may allow them to buy more consumer goods, it is a lot harder than it used to be to pay for housing and health care.
Especially when being more efficient amounts to automating production and cutting the workforce / finding new ways to squeeze value out of workers while reducing expenses.
Even the most anti-Walmart economists will concede that Walmart has had a non-trivial positive effect on combating inflation for staple goods. When everything's cheaper, it's a bit like everyone gets a raise - the only people who get screwed are the workers.
As much as I support local, family-owned businesses on an individual level, I also recognize that for the vast majority of people, cheaper goods are much better for their lives.
I do wish we forced large corporations to pay for any government benefits that their workers collect, though, and continue to push for living wages that make sense at the local level.
Should only large corporations pay for benefits their workers collect? Why should medium, small, and micro businesses be exempted?
Transparently, I ask that question because I’m wary of creating a system where employers have a direct economic incentive to not hire people who would be likely to receive government benefits. Nearly the last thing someone on government support needs is employers not wanting to hire them.
If that means (as I think it does) that corporations are not individually tagged for their specific workers’ benefits, so be it.
I’m also opposed (though less strongly) to creating a taxation system where taxation levels are not reasonably predictable, given enough effort. If I don’t know whether Joe is going to cost me $30K/yr or $50K/yr and I’ve got 500K “Joes”, that’s $10 billion dollars of annual uncertainty. Even if you cap the uncertainty to between 25% and 75% of the range, it’s $5B. For $5B/yr, I can find a bunch of other arrangements that give me less exposure (most obviously using subcontractors who aren’t themselves “large companies”, but even if they are, it becomes “their problem” which is better than “my problem”).
They pay more in the Bay area. Once you get out of the Bay area the pay goes down. Facebook even said if you telecommute they'll take into consideration where you live and pay you based on that.
And if you look at the class disparity we have in the United States, the middle class is almost completely gone now.
last year I drove from Nashville to Miami. passed by many small villages. middle class is still there. maybe you should get outside of the city to see it yourself.
> In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China).
The situation is far more dire in the EU than even that would suggest.
Spain and Italy (#3 and #4 largest economies in the EU) will spend the next 20 years just trying to get back to where they were in 2007, and will have lost a minimum of 30 years to net economic stagnation. That's the good scenario.
Prior to the virus, France had seen zero net economic growth for 12 years. That's despite adding three million people to their population, which means the pie is shrinking for each French person.
Germany had seen zero net economic growth for 11-12 years. With the virus hit they'll probably go a net 20 years with zero GDP per capita expansion.
The same scenario is playing out across most of the EU's members. There's no growth to be found anywhere outside of the Baltics and Ireland (11m population combined), while social system costs continue to climb and demographics continue to age. You can see this erosion effect playing out for example in the collapse of EU spending on infrastructure (which has fallen below the US level as a share of GDP).
I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
A quote from that World Happiness Report you just linked to:
"Happiness has fallen in America
The USA is a story of reduced happiness. In 2007 the USA ranked 3rd among the OECD countries; in 2016 it came 19th. The reasons are declining social support and increased corruption (chapter 7) and it is these same factors that explain why the Nordic countries do so much better."
> I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
You've bought into the propaganda propagated by the ultra rich via cable news and other outlets in order to justify their continued accrual of more and more of the world's wealth: That economic freedom is just freedom from taxes - it's not freedom from ever worrying about going bankrupt or becoming homeless if you get sick. That society works better when nobody cares about the well-being of their fellow citizens, that the freedom to care about nobody but yourself somehow makes us stronger as a society, not weaker. That publicly run institutions are always just 'bureacracies' and 'inefficient' - not the solid foundations upon which other parts of society and the market can rest, which many public institutions prove every day, by freeing citizens and companies that rely on them from having to pay for one or more layers of shareholder profits, freeing them to invest in other things instead. The talking points you are reiterating sound good on their surface, but in reality they are just that, talking points. The reality of what the world becomes when they are used as policy is being felt all around the world these days.
Happiest countries don't have the highest suicide rate.
Nordic countries do have a significant portion of population living in areas where SAD is prevalent, which naturally causes increase in suicide rates. Yet they are not the highest rates.
The US experienced massive growth in the 50s and 60s while having very high tax rates. The US, until recently had a higher corporate tax rate than many European country - the latest US tax cuts brought it down to the same 21% that my native Denmark has. I'm sorry, but this 'deregulation and low taxes will fix everything' myth has been so thoroughly debunked by now that I'm sad to see it rearing its ugly head in an otherwise thoughtful and fact-based forum like HN. What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side? If the middle class has no money to spend, it doesn't matter how cheap the goods are to produce.
And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.
>The US experienced massive growth in the 50s and 60s while having very high tax rates.
The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage.
>What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side?
Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.
> The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage
Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since.
According to Wikipedia, that book makes the argument that economic equality will grow over time. It doesn't show that countries with more economic freedom grow slower. To copy from the "Criticisms" section of that wiki page:
"
According to Financial Times columnist Martin Wolf, he merely assumes that inequality matters, but never explains why. He only demonstrates that it exists and how it worsens.[36] Or as his colleague Clive Crook put it: "Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important, but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might ... worsen inequality."
"
>Also, do I really need to remind you that correlation is not the same as causation?
Indeed, fortunately we also have economic models suggesting such a relationship should exist so it's not just blind correlation.
The danger of inequality is not something new, and the problem isn't that someone is super-rich, the problem is that median purchasing power is going down, because economic growth is not going into the hands of the lower and middle class, and this is causing demand to fall in the market, leading to an inevitable economic downturn. The dangers of this were discovered a century ago during the Great Depression, and are well understood and not really considered controversial anymore: https://en.wikipedia.org/wiki/Keynesian_economics
> and the problem isn't that someone is super-rich
A pie chart has 360 degrees. Give 359 to a small subset and you are left with 1 degree to be fought over. You cannot have super-rich people without having super-poor people. Look at the world, the real one, this one here where the majority of people are dirt-poor.
Meta-comment: I find this style of argument (make one claim, have the claim debunked, make a different claim and say "see I was right") to be very annoying, and I wouldn't mind if it disappeared from HN.
You know what - I agree, the tone here on HN is important to me, and I'll try to do better in the future. In my defense, the comment I was replying to had linked to a bad-faith site claiming the tax rate of the wealthy in the US has not gone down since the 50's, which is only true if you don't count the massive number of loopholes that have been introduced over the years - the effective tax has gone way, way down (Warren Buffett even commented on this a few years ago, how he was being taxed at a lower tax rate than his secretary). That, combined with the way they simultaneously presented what I perceived as a counter-argument to their own previous comment, caused me to jump on that instead, and probably sounded a bit smarmy in the process - I'm sorry for that. FWIW, here's a source for the effective tax rate of the wealthy, which I probably should have linked to instead: https://www.nytimes.com/interactive/2019/10/06/opinion/incom...
I will very happily argue for any of the points I've made, and I promise not to change topics and stay with a single point as long as is needed.
These people should look at Portugal. One of the highest taxers in Europe and our economy is crap.
The middle class is basically paying for the rich and poor and they don't have money to spend on the economy. We can't support our companies because their products are actually more expensive than outside products (companies pay a lot of taxes too).
It's more than known by every good economist that overtaxing isn't good for any economy.
There was talk in at least the London tech scene two or three years ago about Lisbon becoming some sort of tech hub. (Personally, I'd love to move there but I'd have to learn Portuguese) But some companies that did try Lisbon out seem to have pulled back. Last I heard it a large reason was because the 'work ethic' of the Portuguese left something to be desired compared to London.
This comment is not only based on anedotical evidence, but demonstrably wrong [0] (compare hours worked between Portugal and the UK - these are significantly higher in Portugal) and perpetuating stereotypes with regards to Southern European countries.
afaik Portugal is on par with the EU average on income tax and slightly above corporate tax. Of course because of the low average wage it the high bands of taxing start much earlier than the rest of the countries. But lowering taxes does not increase wages, companies will always adapt to pay the least possible and if the wages are lower they will just pay less.
And in all the countries the middle class pays for the rich and poor... unfortunately.
Who you tax is more important than how much you tax. If you levy your tax burden entirely on the poorest aspects of society than of course its going to look bad.
The US is largely socialism and profits for the corporations and free market absolutism and costs for the working poor.
>...The US is largely socialism and profits for the corporations and free market absolutism and costs for the working poor.
These kinds of statements don't really add much to the debate - they sound like political slogans. To add to some light instead of just heat to the discussion, it is better to explain what you are saying. How are you defining poor? What tax rate do you think this group should pay? What tax rate do you think corporations should pay? How does that compare with other countries? etc.
(I don't mean to single out this particular posting, as I have seen political slogans used throughout this thread.)
Portugal’s tax take as a percentage of GDP tracks pretty closely to the OECD average. France, Sweden etc have significantly higher rates. https://data.oecd.org/tax/tax-revenue.htm
That is true, but Portuguese citizens make a bigger effort to pay those taxes than French, German, Swedish... Tax take as a % of GDP doesn't tell the whole story.
Imagine a person in Portugal has a 1000€ salary, and the state takes 40%, the person has 600€ to live.
A person in Germany gains 3000€, the state takes 60%, the person has 1200€, double the Portuguese.
Cost of living in Germany is higher, but not twice that much. And the cost of living already factors in some taxes, such as VAT, so it's not an apples-to-apples comparison.
Ah, now I understand what you meant with "effort", i.e. that the disposable income after taxes normalized for purchasing power would be lower in Portugal than e.g. in Sweden, right?
Right, nobody actually paid 60%. They used their money to build factories and create jobs instead. Which drove growth. Now they can just keep the money.
The actual taxes paid aren't as important as the incentives they create.
> And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.
The winning strategy depends very much on what stage of economic development a country is at. Developing countries often benefit from some level of protectionism (this is the "infant industries argument," which Alexander Hamilton proposed), but developed countries benefit much more from lower trade barriers. In 20 years, it will be China that is pushing for developing countries to lower their trade barriers.
Globalization has broken the social contract. You've got countless companies that truly "form" in western countries with high standards of living - the founders and leaders all reside there. But then they offshore their profits to keep more for themselves, draining that western economy and creating an unsustainable funnel of money.
The problem isn't taxes, the problem is founders who believe they are above the social contract. They want the benefits of a highly stable society with high taxes and high standards of living, but they don't want to pay their share of keeping that system alive.
The problem is exactly taxes and tax laws. These founders live in a society where if you structure your company one way, you pay 21% in corporate tax, and if you structure it another way you pay 0%, and both are legal - which one do you think they will choose? We need to make profit shifting illegal, but it currently isn't. We can't count on founders being 'ethical' enough to not play the game optimally, we need to change the rules of the game, so optimal play from them isn't bad for the rest of us.
If you think the founders have an unfair advantage, why don’t you go ahead, become one and lead by example?
The world needs more founders anyway. They are the ones who created the amazing wealth we are enjoying right now, not the politicians, bureaucrats, regulators or commissioners.
In the case of Apple it's not really accurate to say they paid 0%. Instead, their taxes on overseas sales were deferred until they were repatriated into the US. Upon repatriation they paid $38 billion in taxes on $252 billion of income, or a tax rate of 15%.
The main reason behind the lack of EU successful startups is that they can’t attract talent because they can’t pay employees in stock options which means that when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich and some of them go on to create beer startups.
There is no such cycle in Europe, and it’s all because the lack of stock options. Without them, startups only offer very low pay with little to no reward, and good luck trying to attract the top talent startups actually need to succeed.
RSUs work because they're typically for already public companies.
At vest, in the US, a percentage of shares are immediately sold to cover taxes.
With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees.
The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
Really? I thought most startup get a successful exit, result into their employees being modestly compensated, probably on par with the counterparts in mega corps.
> ...instead of what happens in the US were most employees get rich and some of them go on to create beer startups.
Do most startup successes (which themselves are quite rare) result in most employees becoming rich? I've had my share of successful startup experience as an employee, and there was a nice payoff, but I'd hardly call it "rich" in any accepted definition of the word. At best, it's made up for the time I spent being underpaid compared to market rates.
I think your experience is likely the most common, but ultimately the "startup ecosystem boosting" effect being discussed really only needs the occasional company to come along and dramatically outperform, creating a couple hundred new startup-minded millionaires who want to invest or create their own companies.
When a company has that sort of exit or IPO that results in a couple hundred new millionaires, it also usually has at least a couple thousand non-millionaires. That still sounds like a far cry from "most" becoming rich.
> when one happens to succeed only few people get rich, instead of what happens in the US were most employees get rich
I don’t think this is accurate. Even in successful startups, most employees don’t get rich. Yes, some manage to navigate the complicated financials and can afford to execute their options, but typically only valuable roles are offered stock options and not all employees can afford to execute them.
Even if the company is “successful” and goes IPO, employees that execute their options can lose money while trying to execute their options (many Uber employees right now and plenty of 1999-2000 IPO employees).
In short, stock option incentives are gambling. I’m not sure they are a net positive even for the USA. Yes, we get harder workers for cheaper, but this depends on VC and Fed Reserve money being plentiful, which comes with other costs.
> but typically only valuable roles are offered stock options and not all employees can afford to execute them.
For early stage startups in the valley, pretty much all employees receive options. How many options, dilution and if if a positive exit will occur are all variables, but generally everyone gets an option grant.
I think I was pretty accurate in your parent comment.
Employees who don't stay long enough to vest (much or at all) don't get rich.
Employees who work in roles like office admin, security guard, janitor, intern, etc. usually aren't offered options (frequently because they are outsourced or independent contractors, etc). I'd wager that engineers, designers, and management are consistently offered options, but most other roles vary. Sales frequently insists on large cash commissions, so management probably wouldn't augment that with expensive early stock options.
There is inherent risk in owning stocks -- you need to time your exit well or a wise purchase in options/RSUs can turn into a financial liability or can significantly cut your profits if you exit the stock at the wrong time. I have a friend who exited FSLY as soon as their options execution turned to long term cap gains (resulting in a comfortable profit), but they could have more than doubled their profits (and been borderline "rich") had they stayed in until peak.
Employees don't always time their options/RSU executions well (because life is unpredictable). There is an opportunity cost to risking startup life at a lower up-front salary than working at a larger more stable company that pays more but offers no stock benefits.
Employees can't afford to execute their options/RSUs at the right time (eg. I could have owned significant CloudFlare stock if I was better at saving money while in university).
Employees don't always spend the money to gamble on options/RSUs and their tax obligations because they don't anticipate the company worth much (which can be a misperception or a lack of trust in management/owners).
Sorry that's complete nonsense. it's routine in Europe and the UK to offer stock options. what's more you're only taxed when any gains are actually crystallised - so much more attractive / less risky than the US.
I'm not sure it's a bad thing...
Most of the taxes aren't paid by big companies that can optimise everything at a world level but by the multitude of much smaller companies. If you would replace Apple, Google, or Amazon by a multitude of smaller companies, they would pay taxes.
Would the Irish loop hole not work or the company was European? Sure, maybe it would have been France and Ireland that would have gotten some of the profits instead of The US and Ireland, but the rest of the EU would still be SoL.
Europe isn't USA or China with very large single market. It is broken into small pieces,where each speaks different languages,have different cultural habbits,and different financial means. While I have no doubt that an average Californian does differ a bit from a Texan, ultimately they still share lots of things in common. A Romanian and Norwegian do differ much more.
Why have new tech corporations if they don't bring anything to the table except very few specialized jobs and no taxes, compared to the huge profit they make every year?
What would Europe stand to get from having more Fortune 500 companies? It doesn't seem like it's helping in the US at all. On the other hand, Europe still has a much better lifestyle for people who are not rich.
We must end the concept that nations are subject to the market and corporations whims. That's the narrative they are spreading, but they can't do without Europe's profits, so it's better we realize that as states we have more power over them than they'd like to admit.
Unless we want international trade to be a one-way process that slowly drains the middle class dry, and triggers the next recession when demand drops to zero, then it is probably better to make sure that whenever a company makes money by selling to consumers, enough money is re-circulated back into that country to maintain the purchasing power of those consumers. (That seems to be a core part of China's strategy, protecting their inner market from outsiders, and they're doing pretty well economically compared to most of the world)
The devil is in the details though. I’m sure a US capitalist and a French government bureaucrat have very different ideas as to what constitutes “enough money”.
If we fixed profit shifting, then the French bureaucrat could set a tax rate, and the US capitalist would be free to choose whether they wanted their company to do business in France, and thus the market would eventually find some equilibrium for us. Right now it doesn't matter what the French corporate tax rate is, because multinationals don't have to pay it.
Economic is not my area of expertise, so I don't think I'm understanding. Are you talking about (1) something like a sales tax, where all companies that sell to, in this example, French consumers have to pay a tax based on those sales, (2) only if they have a corporate presence in France do they pay some portion of the profits made in France, or (3) something completely different and I'm 100% lost.
If it's (2) wouldn't that just incentivize businesses to sell to France but not employ French people, and if it's (1) wouldn't corporations just offload the cost of that tax onto consumers so that good are just more expensive in France?
I think that if you're not paying full taxes in my country, you should not receive any police/army/legal system support as a company (obviously while enforcing the low of companies not being allowed to be armed for different reasons).
I would love to see how that turns out for corporations.
Honestly at first glance this seems right. But this argument has been made so much, in so many place, and ended in failure so frequently why don't we think of something different. Hopefully less dependent on government evolvement. The idea that you can vote or tax this problem away seems misguided at a certain point.
I don't think anyone's really tried to solve this yet - can you reference any actual attempts? Also, if we need to fix a problem where companies are exploiting their access to a common resource (the purchasing power of the middle class in a given country) without paying to maintain that resource - how would we ever fix that without involving the only entity with the power and mandate to block the companies' access or charge them more for it, the government?
I think the biggest hindrance here is that transfer pricing is a complicated issue, that most voters don't understand the mechanics of, so there's not been a lot of pressure on politicians to solve it. It's been much easier to just lay the blame on immigrants or whatever, than to actually attack the root cause of the issue.
There is zero chance they will win this on appeal. Vestager should be booted out of her job for this ridiculous waste of taxpayers money. I said at the time on here a few years ago that this was a power grab by the EU commission. The fundamental problem is the US allows its corporations to undercut local competition by 'deferring' their tax payments, then parking their cash offshore and applying political pressure for tax amnesties. One possible solution could be for the EU to apply some minimum tax level against which any US tax payments can be counted, but if there is a shortfall because of deferral tricks the delta gets paid at source.
Apple has been in Ireland since the 1980's. A large fraction of an entire city (Cork) depend on it. It's not hard to imagine that Apple has contributed far more than $14bn to the community, and country, in that time. And it's not a figure-head office either, it has assembly lines.
Countries aren't all identical. Ireland needs to be allowed tune its economic policies based on what it has to offer. It doesn't have the population of France, or the location of Germany. It has english speakers and a reasonably well educated workforce, two factors that aren't unique to it. A low corporation tax policy counts for a lot.
I agree that countries should be free to set their corporate tax rate to whatever they want to attract investment. But corporations should not be able to just shift their profits to any country, but sadly, using loopholes in international tax law, they can currently do so freely [1]. This means Ireland is not just taxing companies for the economic activity that goes on within its borders, it is also preventing taxation of economic activities in all other European countries.
Furthermore, in the case at hand, while Ireland is free to set their tax rate to something low, like 12.5%, it needs to apply this to all companies, not allow any of them to fiddle their way to only paying 0.005% like Apple did. The commission considers this illegal state aid to a company, and I'd tend to agree. It's unfair competion when a company only operating in Ireland needs to pay 12.5% in corporate tax, while an international company with a creative ownership structure involving the Cayman Islands can pay effectively 0%.
I also think that the solution, if you will, does require to take the idiosyncracies of a country into account.
Many people may no realise this, but this exactly holds for African countries too. As the continent develops, some countries will become certain roleplayers that essentially are already apparent now, for those willing to go and look for it.
South Africa is the financial capital of Africa, and it would do most people here good to emphasise that. It is an entry point into the rest of Africa (despite, or because of even, being the furthest away from Europe) and its long term trajectory is probably going to remain in what I guess we could call facilitation.
If we compare SA to Ireland or Switzerland, again, they are countries that attempt to facilitate development. I think tax needs to be a topic in its own right, and the exact properties of a country is also a topic in its own right.
Luxembourg will always be forced into a niche, and whether that niche is tax based on not depends on the options at their disposal. Wealthy people see tax as an expense just like any other and the onus is on ordinary people to build inherent value rather than simply financial value.
But you need cultural momentum for this. South Africa's niche role is compounded by cultural and African factors and I am first in line of those that want a foundational based economy, rather than a facilitation based one. But you really need the will to work hard and build inherent value. My final point is simply that one can complain about countries that focus on tax (or tax evation) but the real question is: What else are the options. (And I'm sure there are opportunities waiting.)
> A large fraction of an entire city (Cork) depend on it
That is not true. They employee a few thousand people in an industrial estate outside a suburb of cork in fairly low ranking jobs. If they were to disappear overnight they would doubtless have an impact but not a fraction of €14bn
Sure was, but 1980's Ireland had pretty much no economy at all. Emigration was an expectation, not a privilege.
The country needed all it could get. And it eventually did very well, then screwed it up in the Global Financial Crisis, but now seems to be doing quite well (until Brexit starts to have an effect).
That stuff only remotely works with US companies because its tax regime wasn't a territorial one. As of a few years ago, the US finally transitioned to a quasi-territorial tax regime, which plugged some of the holes, but not all of them.
And you don't find German (or Japanese, Australian, &c.) multinationals doing this kind of thing because they have _proper_ territorial tax regimes. The US does not, and this kind of thing will continue to be a problem until the US finally does do what the rest of the world does regarding taxation.
And it would be nice if they did the same regarding personal taxation.
> We clearly need better tax laws to combat this, but I'm glad the commission is trying to fight this to the extent they can within current laws, and I hope they win the case on appeal.
I fully agree with the former, but—to an extent—disagree with the latter.
The thing that bothers me about this lawsuit is the fact that it is in essence an after-the-fact tax increase. If they want to reform tax law, then it should be forward facing, not trying to reverse previous established policies. Particularly not for the length of time this covered.
Globally, the US, EU, (UK now), Canada, etc, all need to get their ducks in a row and get taxation sorted out in a sane way.
Yes and to shut down Cayman Islands and Cyprus while they're at it. It goes to show how incredibly corrupt the global elites are that they "can't" shut down money laundering by tiny island nations who would roll over in 5 seconds if told to by someone like the US. The truth is they love it because that's where they keep their money.
That's going to be difficult to organise in a plutocracy.
There are insane sums being spent in organised campaigns to limit the ability of governments to interfere with this ethic of systemic financial capture.
There might be a sweet spot where plutocracy is incompatible with kleptocracy. When you own a government you'd want some level of property maintenance. When you want to enrich yourself with public money you want as much of it as possible. The long vs the short game.
The reason it matters, and why the US and UK are complicit (as are Ireland and several other European nations) is that as someone hiding money you need the Rule of Law. Both countries are famous for the Rule of Law, at least in respect of the very wealthy.
Imagine a hypothetical country the Amazing Fiefdom of Jim or AFJ for short. AFJ seems like a good tax haven at first glance, they have 0% tax on offshore revenues, companies can be set up there for a modest fee of $100, you don't need to be a citizen or ever visit, they don't ask you to file much paperwork and they reject all law enforcement paperwork queries for the little paperwork they do have.
But alas, the ruler of the fiefdom, Jim, just sometimes takes stuff he wants. A billionaire who had hidden $400M and a big stake in Amazon via a company in AFJ one day discovers the company was now mysteriously owned by Jim, no way to dispute it!
If that happens with some tiny island that used to be a British colony you can get it unwound, you'll need to pay some expensive lawyers in London to make that happen so it's not an option for the average person on the high street, but if you've got this sort of "need a tax haven" money you can afford those lawyers and get Jim dragged over the coals until he agrees to give back your stuff.
This faith in the rule of law is why Russians hide money in England not in Russia. If you hide stolen money in Russia, and one day Putin wants the money, he just takes it and if anybody complains maybe they "commit suicide" by hurling themselves off a tall building entirely unassisted...
> If they want to reform tax law, then it should be forward facing, not trying to reverse previous established policies.
The EU argument was that Ireland's "previous established policies" were against EU treaty, and so the (alleged) special deal that IE gave Apple should be considered annulled since it was invalid from the day it was signed.
> On this basis, the Commission concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe's sales profits to their "head offices", where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules.
> This decision does not call into question Ireland's general tax system or its corporate tax rate.
> or act as if it was paid, and paid whatever it would have paid from it to the EU budget
Yeah, lets treat this as a fine and fine them $1 for every million it cost the other EU members. Lessons learned: you can get away with everything if you are just bold enough.
By agreements they signed they are supposed to collect the taxes in a fair manner, so requiring them to collect the taxes they didn't seems to be the least they can be required to do. That would also have the side effect of making every company think twice about using an EU country as a tax haven.
Seems like there's a sovereignty issue here. If you negotiate a deal with the highest authority in Ireland, and they sign off on it, are you done? Why do you have to care what other deals they have made with other parties?
Or is nothing Ireland does binding, until someone else with real power has counter-signed it?
All international agreements represent a sacrifice the "highest authority" makes, setting their reputation and future ability to make agreements as collateral. The "highest authority" further diluted its own authority by making a corporate deal that went against previously made agreements with its actual peers (states), damaging the collateral it already put up.
Whatever ideas you have about the state needing to have the highest authority in the land, if we follow that through by not holding them accountable for agreements made, then that actually substantially dilutes the power the state can have.
> Ireland signed ... trade agreements ... is subject to their rules
Sure. If your employment contract prevents you from taking other work, you may be fired if you break this. You may also have signed up to binding arbitration by some weird court.
But normally the 3rd party (your weekend employer, who did not sign) cannot be penalized.
That's what points out how much sovereignty has been given up by Ireland. It has signed up something much more than a trade deal. A foreign court can not just strike down laws it passes, but re-write them retrospectively a decade after the fact.
It is not a foreign court, it is the highest court in Ireland's legal system.
No law has been sturck down. No law has been rewritten. No law has been applied retroactively.
A deal was found to be illegal, based on the laws at the time, so was anulled (as any illegal deal would be).
This was appealed, and the court found that the facts of the case had been misinterperated (ie they're arguing about what counts as state aid, not whether state aid is illegal).
> it is the highest court in Ireland's legal system.
And not just Ireland's.
And that's what I'm saying. If your legal system is united to this degree into a larger framework, then that new thing is the locus of sovereignty. It is much more than a trade deal. (That doesn't mean it's wrong, or a good idea or a bad idea. But it's a big change.)
The rule of law is a nice aspiration, but it has limits on large-scale cases. For instance I'm sure these laws about illegal state aid could logically imply a conclusion that would result in (say) Airbus going bust. And if the judges ever tried this, the laws or the system would be changed to prevent it. Those with real power would not permit this outcome.
And I think cases like this €13bn tax bill are half way there. Did it really spend 12 years working its way through neutral courts, like some slow squabble over who inherits the family pizza parlor? Or was there a bit more political input now that the EU feels that US tech giants are a geopolitical threat, in a way that they didn't 12 years ago?
And so the sovereignty question is not just on whose soil the high court sits, and who writes the nice rules it officially follows. It's about who gets to decide which big cases to let slide, and which to go after.
If you negotiate a deal with the highest authority in Ireland to access the entirety of the EU Single Market, then yes indeed you should care about EU laws. It's not like Apple is only selling iPhones in Ireland...
If you sign a deal with Nevada to sell products in the entirety of the United States, you expect federal laws to apply, don't you? Well, EU is not a federation like the Unites States, but it's half-way there. You cannot ignore Bruxelles when dealing with the Single Market, just like you cannot ignore federal laws when doing interstate commerce in the US.
I have found that EU is really something hard to grasp for non-European. And to be fair, for most Europeans too. If Ireland wants its sovereignty back it can exit the EU (and the Single Market) at any time. But then of course it won't be the gateway to the Single Market for American companies anymore...
But nobody in Nevada thinks that it is a country. And there is no pretence that its government is free to negotiate international matters (let alone run an army, have its own language, or even hold a referendum on abortion).
> hard to grasp for non-European. And to be fair, for most Europeans too
Yes, I think the degree to which this thing is a super-state (or at least claims to be one) not a trade club is not fully appreciated. Not least by the voters in whose name it was created. It's in some gray area between a federal state and a treaty, and cases like this are illuminating as to precisely what shade of gray.
Given how the Supreme Court decision on abortion has come under fire, I would argue that a lot of American citizens believe that Nevada should in fact be able to to hold a referendum on abortion...
About the EU, "The European Union is a unique economic and political union between 27 EU countries" [1] Who believes it's just a trade club? I'm born in France, grew up in France, and never thought of the EU as just a free trade zone. It's a weird belief to me, and obviously not one anchored in any kind of reality. But that might simply be because it hasn't been sold that way to French citizens, maybe Irish people were told otherwise?
But forget about the EU. When Apple setup its European headquarter in Ireland, it's to sell its goods in all of Europe, what we call the Single Market. The Single Market is not the EU. Apple could have set up its European headquarter in Iceland or Norway, countries that are outside of the EU, yet inside the Single Market. And the same European laws would still apply. These laws are not the rules of the EU, they are the rules of the trade club.
When you enter a member of the Single Market specifically with the purpose of selling to all the members of the club, you can't play dumb and claim you didn't know that the rules of the clubs applied to you.
If Ireland wants to leave the Single Market, it can do so freely. It could even leave the EU without leaving the Single Market if it so wishes, but the rules of the Single Market would then still apply. Trying to stay within the Single Market while ditching its rules is, as demonstrated very thoroughly by the UK, completely impossible.
> * If you negotiate a deal with the highest authority in Ireland, and they sign off on it, are you done? Why do you have to care what other deals they have made with other parties?*
When joining the EU, Ireland promised to have (tax) policies consistent with certain principles. The 'side-deal' with Apple alleged (according to the EU) broke those principles.
If Ireland doesn't want a higher authority looking over them they can leave the EU. This is one of the arguments made by the Leave side in UK Brexit: we don't want Brussels breathing down our necks.
> Shouldn't then Ireland pay it (or act as if it was paid, and paid whatever it would have paid from it to the EU budget).
The EU is not getting paid anything. The EU said that Apple should have paid Ireland more.
It's like the EU saying to Germany "we thing that you are giving an unfair tax advantage to BMW compared to Renault: you need to collect more taxes from them".
> The EU argument was that Ireland's "previous established policies" were against EU treaty, and so the (alleged) special deal that IE gave Apple should be considered annulled since it was invalid from the day it was signed.
Yet the EU sat on this for 12+ years allowing this agreement to continue. If they felt this was a concern, they should have addressed it in 2004... or any year between.
Remember when you were a kid, and your parents told you to clean your room last week, and they gave you a whole week to catch up? And then oddly, you were still on the hook even though they waited a whole week before grounding you?
Same principle. Statutes of limitation exist for a reason.
As I see it, apple didnt fail to clean its room. It was told not to clean it by the parent, who then got yelled at by the grandparent, and now a week later apple's being grounded by the parent.
Ireland is the one that broke the treaty, not Apple. Apple played correctly within the rules & scope available to it, and is being retroactively told that those rules, in fact, did not exist, though certainly every other rule does exist, except for those that might not, depending on our decisions in twenty years.
Your quotes are from the decision that was just overturned, ie, the commission was found to be wrong. The fact is those taxes were legal and not preferential state aid, as was just ruled.
Companies should have never been taxed based on a virtual, and fundamentally nonsensical, figure as the location of their headquarters. They should be taxed based on substantial things, like (the location of) capital, labour and sales. This is what CCCTB establishes. States are still free to set the tax rate as they wish. It's just that then the companies can't escape with the turnover money to another state, essentially robbing the state where the profit was generated.
This is the most important tax legislation of this day. No other debate about taxes, like the rate itself, or harmonisation of the rates across states, makes sense before this gets implemented. The reason is that now the tax rate is evadable and only stifles local/small businesses who don't/can't cheat. Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. But I hope to see this one day.
I'm Dutch and ashamed we are in these lists. Regular folks in The Netherlands don't really benefit too. Can't find it now, but I read a study some time ago that without our current tax paradise regulations we'd be better off. I suspect these things are mostly kept in place by enterprises and people in higher positions who successfully lobby the politicians.
> essentially robbing the state where the profit was generated.
It's a very interesting line of thinking when a company that produces new value and makes money by providing the value to the customers by voluntary transactions (and regardless their location) somehow is considered a robber of the state that produces nothing.
It's a very interesting line of thinking when a government that allows a company to incorporate, protects the company's physical and intellectual property by force and with a large legal apparatus, enforces the company's contracts, trains the company's workers, is somehow considered a robber when they ask the company to pay taxes.
Leaving aside cases of companies that actually have legal entities in a location (such as Apple), the comment that started this sub-thread was about companies that don't necessarily have any nexus in a location, and just provide services to people regardless of where those people are.
$13b seem to me an outrageous bill for those services. Could we see an itemized bill to make sure we are not overpaying the state? Or is it more like they have the monopoly of violence and we have to pay whatever they want or else?
Who is "asking" and who is "taking" in the scenario you mention? The whole notion of "allowing to incorporate", in terms of basic freedoms that a modern society is supposed to maintain and protect, contradicts with the freedom of peaceful assembly and the freedom of association with others, including the right to form and to join trade unions. This form of right should never require a sanction from a state.
Nothing is created in a vacuum, the state produced customers in good health to live long enough to buy shit, enough spare cash to afford it, and enough infrastructure to get it to them as well as educated enough to use it which is the reason that "value" exists at all.
You both formulate good arguments. Nonetheless, there are many countries where one could argue that the customers and infrastructure that make any business viable and profitable exist in spite of the state, and not because of it, rendering taxes a vile theft to benefit a very select group of people with no intention of doing any good with it. In which case, they would be impoverishing society as much as tax-evading companies.
Those companies only exist at this enormous scale because of the societies (I.e. nation-states) that grew them. They rely on literal tons of state infrastructure and decades-worth of long-term state programs/planning that foster their growth, and that of the customers who buy their stuff.
Oh yes, the state infrastructure, the one that was built by other private companies and paid for by the money taken from other private companies and individuals. Before there is a state there is an individual acting on their own volition to organise the environment around, and to achieve something in their life, without needing a sanction from a state.
No, huge companies exists because large accumulations of capital put to productive uses allow for better economies of scale, producing better and cheaper services and products, which the public benefits from. Our overgrown states don't foster innovation and wealth, but hinder it.
To address only a tiny sliver of that massively one-sided view of yours: At least in many European countries, publicly-funded universities train the scientific, engineering and managerial talent these corporations need.
Of course, the states take so many taxes from its citizens that most of them cannot afford private education or healthcare, they are forced to the monopolistic public services, which are usually more expensive than their private counterparts. I'm not arguing that the states don't give us anything in return for the massive taxes they force upon us, but that what the society as a whole gets in return is much less than what they would get if the state let them had their money instead to spend as they saw fit.
There is another poison pill hidden in the public services: because they look free to the economically untrained eye people tend to overuse and overconsume them. That's why you see so many college graduates in careers that end up having no work use, thus becoming wasted human capital. If people had to pay for their education they would see the costs up front and be more efficient with their decisions.
I see health insurance on the same level as other health related services guaranteed by the society, coming out of your taxes. Sure, many people don't need health insurance right now, but many people don't need the fire department without having their house on fire, but they still accept that their taxes are funding the fire department.
As you said, these are "monopolistic public services", so for me it doesn't make sense not to have healthy people insured. The more healthy people are insured, the lower premiums are payed by everyone, and in case of crisis, no one gets left behind.
Doesn't the state provide roads for Amazon, and schools for the children of kids employed at the subsidiaries of Apple? I know there are a lot of details in which "state" (of all the bureaucracies) does that, but is Europe somehow exempt from that arrangement? Is your concern with the EU taking this action instead of Ireland? Isn't that going to be a race to the bottom, where "states" try to out do each other in tax breaks? And, if the cynicism is warranted, aren't lowly paid civic employees going to be outgunned by high paid corporate lobbyists in the end?
The state doesn't provide roads and services on its own, it neither has the required qulification for building them nor posseses funds to sponsor the required effort. Firstly, it needs to take money from somewhere where a money-represented value already exists in the world and then use it to pay for the work of qualified individuals, that tend to self-organise in private entities. The work always is done and the value always is created by individuals. In a transparent world the state wouldn't be able to claim ownership of any results of the work sponsored by money taken from other private entities with a help of the "or else" incantation.
I haven't done the math on that kind of infrastructure project. I would be very curious (and open minded) about seeing an analysis of how payment for roads plays out, especially with toll roads.
In the Portland, OR area (where I live) there are zero toll roads. Maybe that's why I am biased to feeling like state funding these projects is necessary. If Amazon (and anyone else that uses them) were paying for them, perhaps I would think differently.
The roads in Oregon are paid by a fuel and or license tax. Thus everyone that uses them weather it be commercial or personal pays for them not the state. When you consider the recently failed joint OR-Wa bridge project you get to see what happens when state bureaucracy is in control.
That's a good point. But, isn't it necessary to have the state instituting those taxes?
Gas is much cheaper in other states, I wonder how they pay for the same roads.
I actually always viewed the failure of the bridge project as a sign that people won over bureaucrats. I felt like it would add a lot of traffic congestion and not solve problems the right way. I would like to read more about what you are suggesting, do you have any links that speak to your viewpoint?
We both know that "robbery" was a figure of speech, but for the sake of the discussion, I can rephrase it another way.
Whether state(s) should be in the business of "producing things" is for another debate, but it's not controversial to claim that they should be in the business of taxing things.
Now, you can go about taxation the stupid way, collecting unreasonable amount of money from the wrong people/companies for the wrong things. Or you can do it the smart way. CCCTB is the smart way.
I'm not that I'm against making money. But making money should be taxed, preferably the smart way.
> Companies should have never been taxed based on a virtual, and fundamentally nonsensical, figure as the location of their headquarters. They should be taxed based on substantial things, like (the location of) capital, labour and sales.
This is fundamentally the right answer, but don't underestimate the political difficulty in getting there.
Taxing "profits" in the location of the headquarters was always a seduction. You have an international company paying developers in California, manufacturing products in China, selling them in Germany, but if their headquarters is in France then France gets a cut of the profit from all of that whether they had anything to do with it or not. Very nice deal for France.
Until Ireland sets a lower rate and the company moves their headquarters there, and then the crying starts. No, it was a stupid way to tax from the start, not when they moved the headquarters to Ireland.
But you tax capital and labor and sales, well, the implications of that are different. Now if they have operations and employees where you are, they can't avoid the tax, except by moving out. But uh oh, if the taxes are too high they might do exactly that, so now you've got to worry about the rate again if you don't want to lose jobs to other countries. Or your people would have to accept lower salaries to keep that from happening. And on top of that if you lose the jobs you still lose the tax revenue.
The company also can't avoid taxes on sales if they want to sell to your people, but if the company wasn't in a monopolistic industry to begin with then it could easily be the customers paying most of those taxes and not the company.
So the taxes get paid, but so do the true costs of taxing things heavily. The free money everybody always wanted was never really available. And there may be some wailing and gnashing of teeth as people figure that out.
How can the tax ever be worse than a sale? Even if the tax is 100% on the profits from a sale it would still contribute to economies of scale at the production end of things thereby subsidizing all other units in countries with more favourable tax rates and increasing the profits in those countries.
For one thing, sales taxes are on revenues rather than profits (because the entire price is profit to somebody, and otherwise you're giving incentive to corporate shell games again), and that means the tax could exceed the profit to the entity making the decision.
Also, any non-zero profits aren't necessarily better than the alternative, because the alternative is to deploy the same capital somewhere else. Your factory is producing as many widgets as it can for a unit cost of $5, France was paying $10, now with tax you're only seeing $7.50 of that, but people in Oregon (no sales tax) would pay $9.75 so it's now more profitable to sell to them instead. Or you could stop making widgets entirely and turn your factory into condos if that's now more profitable. For that to make sense the profit from widgets doesn't have to be zero, only less than what you can get from doing something else.
Meanwhile if the customer in France still wants the widget, they can get it, but they've got to pay enough so that the after-tax price is still ~$10. So in that case the company keeps making widgets and selling them to France but it's the customer eating the tax.
It was actually an intentional way to tax. The guy who set it up (Fritz Bolkestein apparently) did it this way deliberately, because:
1. It avoids endless arguments about where the profit is 'really' made, i.e. relative arguments about the value of labour vs capital vs equipment vs offices etc. However bad or stupid you think these arguments are, those would be far worse.
2. Corporation taxes are highly inefficient taxes to begin with. It puts countries in a form of competition that should drive corporation tax down to zero, which economists believe is a better state to be in.
The problem is more fundamental: corporate profits are easy to move, and make a poor practical target for taxation. Corporations are free to optimize their structure for tax purposes, so there's nothing stopping the surplus cashflow from returning as bond coupons, intellectual property rent payments, or whatever other clever thing that doesn't book "profits" in the taxing jurisdiction.
Like, as a concrete example, suppose you're an American who owns some car washes in France. $15m in sales, $10m in costs, $5m profit. You could do an equity-for-debt swap, and own the exact same assets in the form of bonds that pay $3m per year and a more indebted company with a $2m per year profit. Poof, you've just moved $3m of European profits and transformed it into $3m of American interest income. Maybe not the best idea, but if you live in the right jurisdiction...
> Ireland, Luxembourg and certain other countries are complicit in this
Most people don't realise it's US tax law which allows US companies to defer paying taxes on foreign profits indefinitely. Without that law there' would be no loophole.
"The role of EU state aid control is to ensure Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise."
Here's what big tech companies don't pay their fair share of:
* defence
* education
* infrastructure
* health
* etc
But our political systems are so corrupt there's nothing can be done about it because they just line the pockets of the political parties who in turn make sure they never have to pay their fair share.
In the end, it comes down to the amount of resources and influences different parties have in society.
Corporations have become more powerful than ever thanks to globalization. Globalisation has also reduced individual goverments power over land/resources. (this is why supranational is a thing).
Why constraint it to large companies? Most companies avoid paying taxes. Heck, most people who have their taxes professionally prepared are avoiding paying tax
Living in Denmark and having worked for the tax system (SKAT) here I am glad that this ruling was overturned. I believe that Margrethe Vestager should clean up the tax system here in her home country of Denmark before trying to clean up the tax system in Ireland. The tax system here is slow, corrupt, beaurocratic, and prosecutes the weak and vunerable, while letting people who are famous, or people who owe billions that are hard to prosecute off the hook.
I guess it is not easy to say what is wrong with the system as there are many deep rooted cultural issues at play here. What I have seen however is that the danish tax system has fined many well intentioned tax payers, often when the problem was that the SKAT themselves have made a mistake. And then at the same time many people who run businesses are able to avoid tax by negotiating with SKAT. I guess the problem is that instead of being run as a public service which is funded by the public, it seems to be run like a business now, trying to get income any way it can. This is partly caused by the compartmentalised departments in Skat and internal prosecution targets
No, this isn't about Ireland only levying 12% corporate tax (which is already a beggar-thy-neighbour race to the bottom).
This is about Ireland abetting Apple (and every other large US tech and pharma firm) to not even pay the 12% but pretend that all of its EU profits were created in Bermuda, BVI or some other zero-tax offshore tax haven. (Via the Double Irish Dutch Sandwich legislation they offered until this year, or the newer and improved "Patent Box" law.)
No. Tax is not an EU competency, which is what the whole point of this appeal was from an Irish perspective. Of course it could be made one as part of a treaty, but I don't see that France/Germany's approach to taxation is inherently better than Ireland's.
Getting there politically is a hard and long process.
The EU exists partially to prevent large multinational companies from playing smaller countries against each other (by having a common market).
Personally, i think european integration is necessary to keep the continent afloat in the era of globalization. Europe is a continent that is highly fractured politically, and having smaller nations is a problem against gianst like the USA and china.
I'm not surprised by this. The European Commission's original decision was based on a technicality related to the fact that Apple did not use the "classic" double-Irish arrangement when setting up their companies in Ireland, but instead used two branches of the same company. If Apple had set up the double-Irish with two separate companies (like most other multinationals), there would have been no question that what they were doing was perfectly allowed under Irish and EU law.
I was always skeptical that this decision would stand up under appeal, since the argument that they received a special benefit from these tax rulings (relative to other multinationals) never made much sense. They were actually worse off under this arrangement than they would have been if they had just done the proper double-Irish in the first place, like Google and Microsoft and everyone else.
> "This case was not about how much tax we pay, but where we are required to pay it," Apple said in a statement.
We have come to accept that certain tax payers (ie. corporate or well lawyered individuals) can chose where their revenue should be taxed. It think it has become obvious that this freedom distorts the spirit of taxation in most (all?) countries. I think it is fair to prevent double taxation across countries but IMHO revenue should be taxed as close to the source (revenue-generating-event) as possible.
> "We're proud to be the largest taxpayer in the world, as we know the important role tax payments play in society."
The old PR line Apple (and others) have been repeating ad nauseum... No one questions your place in the ranking, people care about the proportion (rate) you end up paying. If you're among the largest companies in the world by revenue it's not surprising that you'd be among the largest tax payers.
That is the other argument, and definitely makes sense, but that's also where things get complicated.
Normally you tax profits, which are gross revenue minus cost of goods sold (and yeah, I'm oversimplifying a bit). But in Europe, Apple has only profits, no cost of goods sold at all, since the costs are incurred in the USA. This would seem to lead to super-high taxes everywhere else, where profits are close to 100%, but huge losses in the USA, where the costs for the whole world aren't met by enough gross revenue to cover them.
To avoid that, the European entity takes on a share of the costs by "buying" from the USA entity. And that's where the games come in. What are they buying? The physical goods? Are what markup? Are they also buying the advantages that come from the Apple name and logo?
They can basically set the cost of that IP to whatever they want, and therefore show as much or as little net profit as they choose. Which is what they've been doing. Again, oversimplifying a bit, they recorded all European revenue through Ireland, and set the cost of product + IP + ad share + everything else so high that the net profit was very, very, very low, and sad that very, very, very low number is what they had to pay taxes on.
You could certainly make that argument but with a multinational company with sales in every country it's not exactly obvious where the money is "made":
Scenario A: Apple (USA) pays $200 for an assembled iPhone from their Chinese manufacturer. Then they turn around and sell the phone to Apple (Europe) for $1000. Apple (Europe) then sells the phone to a customer for $1000. Apple (USA) records a profit of $800, Apple (Europe) records a profit of $0.
Scenarion B: Apple (USA) pays $200 for an assembled iPhone from their Chinese manufacturer. Then they turn around and sell the phone to Apple (Europe) for $200. Apple (Europe) then sells the phone to a customer for $1000. Apple (USA) records a profit of $0, Apple (Europe) records a profit of $800.
In scenario A the money is "made" in the USA. In scenario B the money is "made" in Europe. Apple argues that since they are paying taxes on that money in the USA, they shouldn't have to double-pay taxes to Europe as well. Europe disagrees because they want a slice of those taxes.
(Note that no complex IP transfer schemes are involved here, it's solely a question of which entity records the difference in the retail price of the phone vs the cost of goods sold. Also note that in either case, sales tax/VAT is paid to the appropriate country.)
It gets even more complex and game-able when you consider how easy it is to shift deductible expenses to different locations. Suppose you fix things and force Apple(USA) to sell iPhones to Apple(Europe) for $600. What's to stop Apple from moving $400/unit of debt payments to their European subsidiary?
The problem is that the current system for international taxation of trade among daughter companies was devised during a time when international trade consisted of things like bars of steel, for which there is a well-defined daily market price, so it's easy to audit and prevent companies from profit-shifting to avoid taxes. Today, daughter companies trade things like 'the Google search algorithm' and 'the Nestle brand' - IP, which by definition is unique, so no market price exists, so auditing it is impossible, making it a free-for-all for multinationals to get taxed wherever they want.
There are proposals for updated international taxation rules to prevent this issue - for example this one: https://en.wikipedia.org/wiki/Formulary_apportionment The problem is to get the OECD to agree on updating this.
This sounds like a way to tax corporate profits in proportion to the amount of VAT, property tax, employment taxes, etc. already paid in each country.
Wouldn't it be simpler just to tax those things? We already collect those taxes, and can set any rates we wish. Why not just abolish the the tax on corporate profits?
I don’t necessarily agree with your conclusion, but I do think it’s important to emphasize that Apple is collecting VAT across the EU and paying large quantities of money to all EU countries as a result. The amount of tax revenue generated by VAT will be an order of magnitude larger than income tax, since the former is on revenue and the latter is on profit.
> IMHO revenue should be taxed as close to the source (revenue-generating-event) as possible.
What is the source of the revenue of an item sold in country A, manufactured in country B, and designed in company C?
What if it was shipped into country A, but the shipper has no nexus in that country? What if it was manufactured in country B, but the designer has no nexus in that country?
Add in parts made in one country, and assembled in another for more fun.
The new US corporate tax plan has an interesting approach of AMT on corporations of X% of global income or Y% on US income, whichever is more, with AMT credits for foreign taxes paid; and the income doesn't need to be repatriated to be taxed. (IIRC, X is 10, Y is 20). Of course, that only is effective if the company is US homed, if it only has a US subsidiary, that can't be used to levy a worldwide tax.
I know it more complex then I imply, yet, I find it odd that the relationship Apple has with it's far eastern suppliers seems to raise less problems (in their tax jurisdictions)... Why does Europe accepts an arrangement that doesn't favour itself (as a whole - since I'm sure .ie is getting a good deal, or they wouldn't do it)
It doesn't seem to be an Irish tax bill, it's a EU tax bill which Ireland opposes.
One rather curious feature of this case is that if the ruling had gone the other way, and Ireland had been on the losing side, its "punishment" for breaching EU law would have been to receive a large amount of money: taxes the Commission said were owed by Apple.
About 30% of Irish GDP is "leprechaun economics." Funds that transfer through ireland without touching anything, and "would disappear if you tried to touch it." If you look up financial statistics that rely on gdp (eg oecd stuff), they're nonsensical.
This isn't a normal "bidding for jobs" situation.
We recently had an election that upended political norms. The two major parties (like US republicans and democrats) now have <50% of parliament seats. So they now collaborate, almost like a single party. They even negotiate with third parties (recently the greens) jointly.
What tipped the balance was a "left wing wave." The largest party in this wave is Sinn Fein, a nationalist-republican party. Their campaign focused more on left wing issues than republican ones.
In any case, this whole leprechaun economics thing is rarely mentioned. Ostensibly, the political turn should have turned on leprechaun economics. Almost no one mentioned it though.
The benefit to Ireland isn't clear to me. Apple, Google, etc do have real operations here. They employ people and such. But, it's not clear how these relate to the tax evasion. I have never heard an explicit articulation or quantification of benefits.
Politically, I think people just assume that it's beneficial because it's sneaky. A weird expression in irish chitchat is "say nothin!" It's part of a whole dialect (or kant) of gestures & phrases to communicate collusion. It's a part of irish culture, and it plays here.
The upshot is that no one really understands why we have this system, but no one wants to give up the game by talking about it.
$13bn is a lot of money here, about $3-$4,00 per person. It's shocking how little political debate we have on this... not even from those who want to spend this money.
Is there any concensus at all on how global corporations _should_ pay tax? These sort of cases illustrate how institutions think they _shouldn't_ handle tax, but it's not clear to me how we apply tax to a globalised economy? It's seems to be a hugely complex issue with many different stakeholders. Where is the nuanced discussion about these issues that falls somewhere between "Corps are evil" and "innovation is vital"?
Why should corporations pay even more tax? They're paying salaries, which are subject to income tax, and stock gains are also taxed when sold. Also, any sales they generate are subject to VAT/sales tax. Not to mention property taxes for their offices, etc.
Also, your account's posting history is egregious: https://news.ycombinator.com/posts?id=mdszy. This is not a borderline call. Accounts that post like that get banned here, regardless of what they're espousing.
Personally I think they ought to pay any tax that doesn't require an 'unfair' transfer of revenue. Selling your product to at a nonsensical price to an affiliated company in a different country should be considered collusion as far as I'm concerned.
The tricky part is pinning this down in legislation, although viewing it as collusion might make this somewhat easier as there are already laws against collusion and monopolies that you might be able to leverage.
EU needs to solve this problem at its roots and put pressure on tax Haven states directly. If that necessitates a reform that gives expanded authority to EU so be it.
I'm not confident that the EU will address this situation, much less solve it. The government in Brussels does not want to be known for challenging domestic tax policy that has existed for years, especially in a post-Brexit era. I could be wrong, and maybe the EU will put pressure on small tax havens in order to give reassurance to working class citizens in larger countries.
That is exactly what they shouldn't do. Firstly, what is the agreed definition of a tax haven, and secondly, which countries belong on that naughty list? Thirdly, when many of those countries are EU members with voting and even veto rights to block such reforms, how exactly do you think the EU is going to put pressure on itself?
Also Ireland is off the hook, if you remember they also disagreed with the original ruling and maintained that they were not offering special deals to various companies like Apple. Instead they benefited from the massive influx of liquidity in their banking system, and all that implies on their domestic economy.
They have since reportedly closed down this option in their tax code because of optics, and they probably don’t need it so much anymore.
Are you sure we benefited from that "massive influx of liquidity in their banking system"? That was loans not gifts, my income tax as an Irish person has never been so high, as we will be repaying that "massive influx" for a generation, the burden we must bare to stop that bank system failure from spreading through the eurozone.
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[ 3.7 ms ] story [ 350 ms ] threadThat’s a really beautiful example of spinning the story of what’s going on.
This lawyer also has one of the worst success records in these types of cases.
https://en.wikipedia.org/wiki/Double_Irish_arrangement
https://www.wsj.com/articles/apple-to-pay-38-billion-in-repa...
> A provision allows for a one-time repatriation of corporate cash held abroad at a lower tax rate than what would have been paid under the previous tax plan.
https://www.nytimes.com/2018/01/17/technology/apple-tax-bill...
You're free to argue that 15% is not a high enough corporate tax rate, but it is factually incorrect to say Apple did not pay US tax on the money they earned overseas.
No, that is decidedly not what we are talking about. The claim was that holding all your money away from the US does not matter because the tax will be paid eventually. As we see, no it wasn't and the tax rate was not lowered because "taxes change over time" but because otherwise companies will just not ever repatriate their money.
It is factually correct to say that apple did not pay the full US tax rate on the money they earned overseas. You are free to argue that this is fine and they at least still paid some, lower tax rate, but this is the whole topic we are talking about. Apple pays very low tax rates and the EU, Ireland and the US are arguing whether this is unfair (state aid) and should change.
A temporary change in the tax rate during 2018 is, by definition, the tax rate changing over time. If a product normally sells for $50 and I wait until it's on sale for $25 to buy it, did I pay the "wrong" price? No, I paid the price the vendor set at the time of purchase.
The reason we don't see as much of this in full-size desktops is because density is clearly not the objective and it would mean sacrificing the modularity and flexibility of established standards.
Or in other words, more expensive with no real gain besides aesthetics, which aren't worthless but I'd bet they aren't worth _much_ for a box which spends most of its time under a desk concealing its insides.
https://finance.yahoo.com/quote/AAPL/financials?p=AAPL
these taxes are not taxes on apple (the company). They do not count towards a company's taxes paid.
The conventional view is that Apple pays no tax, Ive seen that asserted on HN many times, but it's just flat out not true. If you wan to say the above isn't enough, sure, fine that's an opinion you're entitled to hold. I don't even necessarily disagree, I think there's a reasonable case to be made that we are excessively incentivising the concentration of capital but that's a question for voters and politicians not individual companies.
they do however collect it
this is the entire principle behind VAT
A company collects VAT from customers when they purchase. But it also buys from suppliers at a lower value. It pays the difference in the two VAT numbers (from customer-to supplier) to the VAT authority.
Most of that €13billion would have gone to other countries anyway.
This sort of silly emotionalism gets the conversation nowhere. If you can't write good rules to make companies give you money for efforts mostly done in other countries, what do you expect?
You make it sound like writing such rules is easy. I don't know of any countries thst have succeeded in doing so.
What this does highlight is that the law as it exists is arguably not fit for purpose, which is what many have been saying for a while, and that a reform of tax law across the EU is necessary.
People in Europe keep saying these are "brass plate" operations -- however Google, Facebook and Apple all employ absolutely thousands here. US Multinationals are crucial to the Irish economy and tax base.
Apple employs 6000 people in Cork.
Which company are you talking about? Apple's tax rate in 2019 was 16%. They paid $10.5 billion in corporate income taxes.
The problem is the bureaucracy of the EU can't manage to fix their tax laws. With 27 members of the EU, and a broad spectrum of economic condition among them, there will always be nations that will benefit from very low tax rates. There is no scenario where the EU will ever fix their tax problems. Ireland is set to become one of the wealthiest nations in world history because of their corporate income tax rate, their GDP per capita is almost 100% higher than Britain and France now and that gap will keep expanding over time. Ireland is going to give that up? Not a chance.
Hungary is at 9%. What's the EU plan for dealing with that? Threaten them? Sanction them?
I also don't consider CEOs with hundreds of millions annually income to be "normal people" either.
I'm not saying this is wrong, I'm just objecting to the notion of this being "normal".
The EU could have been a vehicle to solve that problem together, but since then I lost my believe it could enact change. Ireland has probably interest in large cooperation staying in Dublin and it might really be in the interest of Irish citizens too...
Still, the current situation is just a grave case of injustice.
Just because Apple have found a way to avoid tax, doesn't mean it's not their fault.
You might find some idiots who argue there's a shareholder requirement, but that's not the law either.
This is a pretty ridiculous comparison. Murder isn't bad because it's illegal, it's bad because pretty much all ethical systems consider it a terrible thing to randomly kill someone. There's certainly a lot less agreement that a company is ethically obliged to pay a government a double-digit percentage of its earnings if it wants to sell people there things they want to buy.
No it is not ridiculous at all. What is ridiculous is the denial of the effects of the slow-violence of the ascendency of the rentier elite, and the subsequent plunder of the commons. [1] These rentiers pay very little taxes (if any) and park their illicit gains in offshore foreign tax havens. We are also in denial about the scary situation of the Precariat class, both in terms of the extreme inequality and class divide in global North (the USA, Europe, etc.) [2], as well as the divide that exists between the global North and the global South. [3]
The biggest factor of the ongoing plundering is the way the US empire enforces the corporatocracy's parasitic intellectual property rights claims:
"A globalised intellectual property rights system was immensely strengthened by TRIPS (Trade-Related Aspects of Intellectual Property Rights) passed through the World Trade Organisation in 1994, shaped by a few US multinationals, backed by the US and UK governments. This has facilitated the commercialisation, privatisation and colonisation of ideas. Since 1994, the annual filing of patents has more than tripled, with the global stock of patents close to 12 million, each giving monopolistic control of some idea for 20 years or more.
Many patents result from publicly-funded research, diminishing the risk. But TRIPS allows corporations to receive monopolistic income for two decades, or use the patent to block others from producing something. Those claiming to believe in free markets should have opposed the trend, but reveal their class-based ideology by keeping quiet. There is evidence that the patent system hinders economic growth and innovation. It merely increases inequality and rentier capitalism. George Osborne, as Chancellor, made it even more blatant with his Patent Box tax break that in practice benefits multinationals coming to Britain if they have patented products, particularly Big Tech and Big Pharma. That tax break merely accentuated the plunder of the intellectual commons." [3]
I absolutely see the systemic inequality (and precarity) caused by the artificial scarcity mechanisms, lobbied for by the corporatocracy, as slow-violence and murder.
I say all this with the hope that we shift towards social production/Commons-based peer production, with a revolution of the parasitic rentier business models on digital assets, which make no sense anymore in a digital society where information now has a (near)-zero marginal cost of reproduction and transmission: Protocol Cooperativism.
[1] and [3] https://www.opendemocracy.net/en/oureconomy/plunder-commons-...
[2] https://www.youtube.com/watch?v=nnYhZCUYOxs
[4] https://www.aljazeera.com/indepth/opinion/2014/01/flipping-c...
If companies were allowed to murder people, I would feel staunchly more endangered.... but seriously, Ireland has lash tax laws to lure these giants into their country, this is no secret, we have several countries within the EU engaging in similar strategies.
I didn't say that the amount of taxes Apple pays isn't morally questionable. But you would still need to complain to representatives, because they are responsible.
I'd claim that the absolute vast majority don't.
If apple wants to be an asshole we should treat apple as one.
But you will have to be fair and treat all those doing the same as asshole. Which is pretty much ALL MNC.
For larger companies it's just a cost/benefit exercise - there are professionals and an industry built around making and executing these decisions. If the rewards are large enough, they'll do it. How can I, as a consumer, work out if Apple is paying the correct tax on the app payment I make in the App Store?
But equally not all tax evasion is on the scale of Apple's. There is plenty going on at the other end of the spectrum. How can I, as a consumer, work out if my local window washers are paying the correct tax on their cash payments?
I would argue it's virtually impossible for a consumer to establish these facts. And that's the way it should be - we ought to be able to rely on specialist agencies to enforce the rules.
Ireland has built its modern economy on being attractive to multinationals. And it's worked. 10 MNCs alone pay 40% of all tax revenue in the country. They've brought jobs and wealth to a country that was previously big in dairy & emigration.
For the generation above me, the career path was study, leave, earn your money elsewhere - and perhaps come home one day to start a family. Perhaps. For the generation below me, they can go straight from Uni to FAANG (maybe FAAMG? I think msft are bigger than netflix in Dublin), startups, or elsewhere in the booming tech & pharma sectors.
Pandering to MNCs was a good strategy. It paid off. But it's not sustainable - no-one actually wants to win a race to the bottom.
I'm not sure biting the hand that feeds us is the best step to make right now though. We need to diversify first. We need to encourage home-grown talent. We need to wean the MNCs off their tax strategies slow enough that we don't startle them, etc.
Like it or not we are currently intertwined. That needs to be solved first - otherwise we just turn the tap off and return to the 80s.
(Yes I'm biased: I work for an MNC that probably wouldn't be here without this strategy. Without this strategy, I wouldn't be living here.)
I mean, a race to the bottom in the normal sense is cutting taxes or spending money on attracting these companies. We help these companies evade other countries' taxes, not our own.
Also, officially, the entities involved in the tax evasion are not related to the entities that actually employ people. Would Google move it european customer support offices without this tax deal? Theoretically, they could take advantage of it without employing anyone in ireland.
It's all horribly ambiguous. I've never really understood how it works.
There are other benefits to being in Ireland. We have a common-law legal system, which is more familiar to Americans than most continental systems. We mostly speak the same language. We're still in the EU, etc.
How much of a presence you need here to make it work, I'm not entirely clear on. But it does seem apparent to me that once you're maintaining a presence anyway, it knocks down the largest barrier to actually building on that presence.
For example, it's widely assumed that Apple are only here for the taxes. I think they were originally here as a low-cost entry into Europe. But however it's worked out, last I heard Cork was the only factory (or perhaps the only factory outside the US?) that Apple actually owns. I'm typing this on an iMac that was assembled in Ireland. Apple are a success story - even more so because they're in Cork, rather than everything but everything being built in the Dublin bubble (a separate but very real issue).
And taxes aren't the only incentives; I used to work in a building that was sold to DEC (by the Irish Development Agency) for 1 Irish pound - which would have been $1.45 when we left the pound in the 90s. Not sure what it was worth when we sold the building, but .. probably still a close approximation of pocket change. And again, it paid off - it sounds like a story of us "bending over for the yanks", but the site passed through DEC to Gateway to HP to HPE. What started off as a factory for Digital is now stuffed full of developers for HPE. We haven't just had decades of employment out of that deal, but the value of that employment has been constantly rising. Ireland's modernisation is the result of thousands of such stories.
But as for a race to the bottom, it sort of is. Factories are being built in Central & Eastern Europe today, for most the same reason they were being built in Ireland in the 70s and 80s. Just as we were trying to undercut France, Germany & the UK to get our leg up - they're trying to undercut us to do the same. I do think there's a point where we need to "pivot" to actually acting like a modern economy, and let other nations take our rung on the ladder - instead of having to lay claim to one even further down.
I do agree with the idea that our modern economy shouldn't still depend on being a pseudo tax-haven. I just don't think "hit them as hard as we can" is the right solution, especially while we're still riding on their backs.
(To make this look a little less rant, I'll cheer it up with a fine example of a PDP that does not say Maynard on the front)
https://en.wikipedia.org/wiki/DECtape#/media/File:DECTape_un... https://www.flickr.com/photos/32614724@N06/3045263847
The well known MNCs seem to be here largely in an operational capacity, the majority of their workforce would be something like trust/risk/support/finance/sales. In terms of "R&D" and "innovation", work that develops the products and services that are sold, I see very little of that happening in Ireland. Yet these companies have huge engineering and product teams in London which are still growing, and the fact they're not placed here is rather telling. For sure we've benefited from the presence of these MNCs so far, but for it to be more sustainable and for the economy to mature further I think we need to be looking to become a country that's attractive beyond being an operational base.
On the hardware side Intel, Qualcomm, Huawei, HP, Analog Devices, Xilinx, Nokia Bell Labs and many more all have extensive R&D departments in Ireland.
On the software side, Amazon, Microsoft, Facebook, Google etc. all have engineering roles advertised currently on Linkedin.
For the software side, what are those R&D departments actually working on? Would you really say it's R&D and product development? From what I can see, both from my own experience and from job posts, most of the engineering jobs are themselves operations related (SRE, infrastructure, customer support). I wasn't saying we don't have engineering roles in Ireland, but what we do have are not prime roles in terms of the companies products and services, and we should be looking to grow beyond facilitating company operations.
The only one I know is in US making Mac Pro.
Interesting, what else is assembled in Cork ? If I buy an iMac in UK, would it be assembled in Cork?
Why is a plant in Cork entry to EUR? Couldn't those be shipped from China?
( Considering this is Apple related I cant be the only keep reading Cork as Cook XD )
For the UK - possibly. The only product I'm aware of, is that they build configure-to-order iMacs. I have no idea how far they distribute from there, but I think it's a safe assumption that they don't maintain this facility just to ship CTO iMacs to Ireland. So I'd consider the UK a safe bet, and most likely most of EMEA. Could they be shipped from China? Most probably - my CTO MBP was. I have no idea what their reasoning is. (Although I'm almost certain it's not all they do in Cork - they have a second campus in the city centre, which wouldn't make sense for manufacturing.)
But for Cork being a foothold into the EU - Cork is their EU headquarters. The company operating there is Apple Distribution International Ltd, not Apple Inc. This is a large factor in how the finances are set up (at least as I understand it) - a mac sold in the UK goes on the books at ADI Ltd, Ireland - not Apple Inc, Cupertino. And this is how "Apple" ends up holding huge amounts of cash outside of the US. Their right hand is an American company, but their left hand is an Irish company. So the US only taxes them on funds held in their right hand.
If you're in Europe, and you have any email receipts from buying things from the mac/ios app stores - scroll to the bottom and check the address. There's a very strong chance it's not Cupertino.
While I'm on a ramble - I also find it curious that Apple don't have a single physical retail presence in Ireland. There's an Apple store in Belfast, but not in Dublin - despite Dublin having 5x the population. I have a strong suspicion this is not a coincidence either.
(I have absolutely no relationship with Apple other than as a customer - this is all just my understanding based on paying attention, and absolutely no inside knowledge. Obviously, else I'd be screwed right about now, eh?)
It's a race to the bottom as soon as any of those other countries undercut your tax rate to try to steal the MNCs back. Most countries realize that isn't sustainable, so for now it hasn't happened.
What a fucking world we live in sometimes.
Right now Apple is probably winning a battle but might be losing the war. The next big EU mandate, besides tackling climate change, will probably be clamping down on tax shenanigans.
Next time they won't even be able to win anything as the law will be explicitly against such corporate maneuvers.
In most cases, a veto can't happen unless the following conditions are met:
1) Less than 55% of total Member States (less than 15) voting
AND
2) The voting Member States represent less than 65% of the total EU population
AND (assuming at least one of the conditions above aren't met)
3) At least four countries vote to block the measure
OR (if not all countries are voting)
4) The minimum number of countries that represent more than 35% of the total EU population, plus one country, vote to block the measure.
This prevents e.g. 3 big countries from blocking the others.
For instance, the Netherlands announced a withholding tax on royalties for 2021 "for cases where abuse is involved" [1] after international pressure. The way I read this is that they are building a facade where it looks they are complying with other EU regulations, but in reality it's business as usual. This way other EU countries have no appeal to these schemes as the Netherlands can say "we looked into these allegations, but no abuse there" and do nothing.
[1] https://www2.deloitte.com/content/dam/Deloitte/global/Docume...
However, the reality is... realpolitik still exists. If Germany and France decide things should really change, what negotiating power do you think the Netherlands or Luxembourg or Ireland really have?
For example the Dutch economy is basically hitched to the German one, Germany can find a lot of creative ways to inflict a lot of pain on the Netherlands if it really wants to ;-)
[1]Seems I was wrong about this
They'll be accused of wasting time and doubling down will further enrage EU citizens unless they can ensure a favourable outcome.
"The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 percent on its European profits in 2003 down to 0.005 percent in 2014." [1]
[1] https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
[0]: https://en.wikipedia.org/wiki/Abuse_of_rights
Hopefully the rest of the world won't fall for the same corporate schemes we in America did. This doesn't look so reassuring, though.
In Ireland you pay 20% income tax on the first €35,300, and 40% on income above this amount (if you are a single person, there are different cut-offs for married people and one-parent families).
You also pay an additional Universal Social Charge on all income over €13,000 - between 2-8% depending on your income level, or 11% for self-employed income over €100,000. Add on pay related social insurance (PRSI) of 4% too.
It’s at 15 percent for people earning the median wage (€3,300), meaning half of all Germans pay 15 percent or less of their salary in income tax. Your range if very far removed from reality. (It is true, though, that for very high incomes 35 percent aren’t the ceiling, that’s somewhere in the forties if you are making several hundred thousand per month.)
I already included the Soli in my calculations and church tax is strictly optional.
Are you sure about that they are not taxes? Those payments are decided based on a percentage of your income and are mandatory, which really sounds like a tax.
Mandatory insurances/payments are taxes in disguise, where you support other people directly for a specific purpose, unlike indirectly for a general purpose. Either way, the state gets the money and distributes it, just like a tax.
"The EU's General Court said it had annulled that decision because the Commission had not proved that Apple had broken competition rules."
An alternative interpretation is that the high degree of taxes and regulations in Europe is preventing the growth of new companies there, resulting in fewer jobs, opportunities and investments. If Apple was a European company Europe would be getting a lot more taxes from it. In spite of Europe's larger population, in the past few decades it has produced way fewer new Fortune 500 companies than the US (and now also fewer than China).
On the other hand, Europe has lower inequality amongst citizens, and an argument could be made to say that this increases happiness. What they are missing out on wrt fortune 500's is creativity that creates new technologies that pushes boundaries and revolutionizes the world (perhaps an oversimplification of the argument). Though they may not be at the forefront of this, it would be inaccurate to say that they do not benefit from innovations occurring in the world.
My argument is that they currently occupy the coveted position to benefit both from the inequality of other countries yet retain the benefits of a more equal society. Viewing the entire world as an unequal society, the winners would be the ones at the top of unequal countries, followed by the equal countries, with those at the bottom of unequal societies trailing. Ideally the entire world would all have equal societies, but in no situation would I think countries with equality strive for the benefits of those with unequality
Literally any entity they interact with. And F500's interact a lot with a lot of entities!
Take Amazon. Employees in warehouses are low wage and hire and fire jobs. The CEO is getting richer and richer, not everyone is profiting as well as it could be.
What Europe would need is to excel in computer science as well as design and engineering. The topic is pretty lacking here and would need a push.
The result would be companies that could deliver experiences equal to the US or better. Take Facebook, a European version with the data protection laws here would be infinitely better.
same old argument that marx has - that capital ownership (and by extension, capitalism) is the cause for such inequality.
I personally don't think all inequality is the same, and inequality is what drives people. There's a reason why communism, and their strive for equality, has so far failed as a form of governance, and as a form of market economy.
Absolutely! If there is no inequality there is no profit for working more. If I can't earn more by working more then I'll just do the bare minimum and still receive my equal share.
Luckily I never lived under a communist regime to witness it, but I've seen this happen in companies with middle managers who don't care: a few employees start working very little, a few more follow suits, motivated individuals complain, see that nothing happens and then start slacking as well.
Bezos is not taking enough cash from Amazon to be even remotely relevant to what they pay their warehouse workers. His cash compensation in 2019 was 1.6 million. Not sure how that reflects in 2020, 2021, but the point is that Bezos is only absurdly rich in theory He is theoretically worth hundreds of billions- but his actual consumption of goods, services, resources is a tiny percentage of that.
There is no direct link between Bezos net worth and allocation of resources to laborers, and attempts to paint that picture are misguided.
You criticize Amazon for their 'low paying' jobs- do you really understand the space these jobs exist in? I've worked warehouse gigs in college. I'm sure the Amazon jobs suck- but their minimum wage is what my supervisor got paid at a small building supply company. Amazon is actually considered a high paying gig in that arena.
If they raised wages of factory workers, profits go down, stock goes down, Bezos net worth go down. no?
They then also can hire a better class of workers, leaving some working there now no longer working there. And as prices go up, everyone loses some value to buying these goods, which is then less to spend on other things.
When a worker is willing to work for some wage and an employer is willing to pay it, both sides benefit, and society as a whole is not paying extra.
> ... profits go down
As does innovation which is paid for from those profits. And outside places, such as teacher pensions, 401ks, union pensions, state pensions, all lose money too. Taking this money from those who funded Amazon via stock purchases and secondary markets would ensure that later there is less investment available for new companies, now jobs, new industries.
Stock markets lets companies get capital to grow and usually employ more people. Taking out these incentives means less companies and less jobs, which means less competition among employers to hire people, which means less wages.
Doing things inefficiently, such as paying lots more than needed to clear wage floors, or paying a worker to do one task instead of two, or similar, means less value in society overall than if the things were done efficiently.
No "normal"employee/worker is achieving that. And he's working equally hard.
I think saying that other jobs are worse and amazons are so great so people should shut up and be happy is the wrong idea.
Instead we should strive to make all jobs better and when jobs are shit no one should be forced to do them. That's a goal humanity should achieve.
In the current world workers choose to work there.
There are usually many other choices available that were discarded by those workers. What if all replacements were just like those numerous other companies that the current workers didn't choose? That seems more likely than some company appearing that gives them vastly better options.
Workers are also a pretty big beneficiary: look how well workers at recent Fortune 500 entries like FAANG are paid. Even after accounting for subsidised health and education benefits the average European developer is still lucky to earn even half of what the average US developer does. Sure it's noble for Europeans to want more equality but I don't think policies that reduce salaries are a good way to do that; better to lift the worse-off up than pull the better-off down.
Europeans who keep tooting that "we don't need US salaries" tend to be the more privileged ones who will also inherit a house from their boomer parents and take it for granted, so they don't feel the stress of the rat race with skyrocketing house prices and income inequality.
So no, we DO want better paying jobs and lower taxes otherwise we'll go back to a feudalistic society where a select few own the housing and means of production through inheritance and everyone else and their offspring will forever be stuck working for the upper class so they can consume their products and pay them rent.
In most of the US, learning leet-code offers one a meritocratic lift up to the upper class while in most of Europe(except the East) it does not.
People generally don’t buy but rent and the rental market is set in such a way as not to gouge people. Still expensive but salaries are relatively high and in all other respects costs of living is very reasonable
Wait, something doesn't add up here. I see many programmers migrating from eastern to western Europe, but not the other way around.
It is true that programming as a profession will offer comparatively higher standard of living in eastern Europe (when compared to other professions), but that's because the overall standard of living is lower than it is in the west.
Even if you're talking about just software devs, people still move to the west for higher salaries, though I believe there is more movement towards the US, especially since the software industry has a lot of local branches of US companies.
But I can tell you from the ground that at least the common perception is that you are generally going to be wealthier as a software developer in western Europe than in Romania, even though in Romania software devs tend to be much better off than the majority of the workforce (and even though software devs in Romania don't pay income tax on their salaries, which is a nice 15% rebate).
You now get a fast shrinking middle class and dismal living condition in lower class.
Of course, they could have combated this with more supply. Not sure if they have done so.
It just seems weird to me. Why are people paying such high prices when there is farmland so close by that you could buy and use to build some condominiums, townhomes, duplexes or even single family homes.
[0]: https://www.supermoney.com/inflation-adjusted-home-prices/
Rent is determined by what people with jobs can pay, property prices are determined by what international investors with deep pockets and easy credit can pay. Which one are you? If you are the former, you will be paying down a mortgage that you can barely afford. You will be a slave to the property. What if you lose the ability to pay? How secure is your paycheck really?
Keep your cash, and invest it somewhere else. You can find a new place to rent. You can leave if your community turns to shit.
The international investors with deep pockets own very, very, very few properties compared to regular people.
What if you lose the ability to pay? How secure is your paycheck really?
What if you lose the ability to pay rent? How does that make you any better off?
Keep your cash, and invest it somewhere else.
I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property. If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.
You can find a new place to rent. You can leave if your community turns to shit.
You can also sell your house/condo and move somewhere else, at any time.
I bought my house 6 years ago. Rent prices have gone up about 30% in that time. I used to think my payment was crazy compared to renting, not I know of people renting much worse locations that are paying more, and I'm about to drop the mandated PMI because I dropped below 80% of the principal left to pay, so my payment will go down be a couple hundred more.
Doesn't matter, a rising tide raises every boat.
The point is that property prices have diverged from rental income, because low-interest credit from around the world is chasing properties, while stagnant wages imply stagnant rental income.
> What if you lose the ability to pay rent? How does that make you any better off?
I don't have to foreclose.
> I have a mortgage with 75% of the principal left to pay, where the interest on the loan is somewhere between the third and the half of what I'd pay in rent for equivalent property.
Between a third and a half? That sounds like a lot.
> If I was renting instead of paying mortgage, I wouldn't have any cash to keep to invest elsewhere anyway.
So you're saying your mortgage payment, taxes, insurance and upkeep is equal to rent? Where the hell do you live?
> You can also sell your house/condo and move somewhere else, at any time.
At any time? Yeah, good luck with that.
> Today, Munich is Germany’s most expensive city in which to buy property, with asking prices reaching €35,000 per square metre in some exclusive developments, according to Engel & Völkers. The average price per square metre in the city is €7,630, dwarfing the €2,993 in Germany as a whole. [0]
That's wild. In USD per square foot, that's $3,700/sqft, $800/sqft, and $316/sqft respectively. Meanwhile, San Francisco's median is $1,100/sqft, the metro area's is $500/sqft, and california's as a whole is $315/sqft, remarkably close to germany as a whole. America's is $123/sqft.
Thank god for SF salaries (apparently about 150% of munich salaries).
[0] https://www.ft.com/content/9ba4873a-60f3-11e9-9300-0becfc937...
Give it time though! The Dublin NIMBYs scream and shout anytime anyone tries to build anything, and then wonder why only tech workers can afford to live in the city centre.
The median salary is about $106k a year which isn’t too far from €100k a year. I am not sure if these wages include non-salary comp.
[1] https://www.bls.gov/oes/current/oes151256.htm#st
Given a fixed amount of resources, this isn't a choice but a matter of fact. You cannot do one without causing the other. This then becomes deciding what the lowest level you're comfortable having your fellow countryperson living at with the requisite cost to those with the means.
People don't consume resources, they consume goods and services. The IPhone is valued at a much higher price than the sum of raw resource components it contains.
Economic growth is what allows us to increase the amount of goods and services people can consume from a given set of resources. Economic growth is why a single farmer with modern equipment can produce more food than a hundred subsistence farmers could a few centuries ago. Economic growth is why we can have real-time high-definition video conversation with somebody anywhere in the world.
The more obstacles we put in the way of growth, the slower we improve our productivity, the slower we grow the amount of value we can extract from the resources we have.
I would counter that it isn't economic growth that enables the technology of today, but technical innovation that drives economic growth that enables either larger populations or a more wealthy population. Given unequal societies, economic growth is only beneficial for those who are already benefiting from the system and serve to increase inequality, but given an equal society benefits all. Therefore instead of worrying about economic growth, I propose that we invest in technical innovation that will drive economic growth as a byproduct and legislate for a more equal society to benefit the most amount of people.
that's not true. Especially if you view it from the angle of absolute poverty.
I wouldn't care that Bezos has another bazillion dollars due to economic growth - because with said growth comes more economic opportunities for the poor. Where once they had no economic value, there could be from being an amazon deliverer.
Where once there was no economic value as a subsistence farmer, the outsourcing of labour has generated economic value for underdeveloped nations. SO much so that China is now threatening the hegemony of the USA!
Economic growth lifts all.
Economic growth does lift all, but in an unequal society disproportionately lifts those who are already well invested in it. It will barely improve the lives those at the bottom with no equity in the market, perhaps with slightly better consumer-grade technology, but nothing in terms of income, social safety, or health that comes with climbing out of poverty.
Lastly, some pies are not growing.
All technology is a science, i think you are trying to draw is the distinction between fundamental science that discovers laws of nature, and indutrial kind that figures out the best process for manufacturing stainless steel.
>> "Often times technology precedes the science," This can happen by freak accident, but generally science has to find and researched some law of nature before you can take advantage of it to develop some product or manufacturing process.
People are not equal in many ways - I don't see why we always focus on wealth. What about influence, what about looks, what about education, what about family life quality, etc...
I completely disagree - increasing total wealth allows new things and is more important than how people judge their wealth relative to others.
You just restated your opinion without providing any new arguments.
> People are not equal in many ways - I don't see why we always focus on wealth. What about influence, what about looks, what about education, what about family life quality, etc...
Most of these things can't be redistributed.
FANNGS, by definition, are 1% of the Fortune 500. In term of headcount, it's even lower. They should not even be part of this argument. You can't base taxation policies around the personal experience of hyper-specialized, in-demand trained professionals.
Fortune 500 no1: Walmart. no2? Amazon.
Are you arguing that those kinds of companies have a upward pressure on salaries? Because at least in the case of Walmart and Amazon (excluding AWS), it's proven that it doesn't. And in terms of workforce, the low-pay employees that those companies hire overwhelm "well-paid" engineers from FAANGS a 1000-1. And that's not even accouting for all "red badge" contractors not lucky enough to get a cosy position at those FAANGS, who don't appear in the company's salary statistics, and are not in such a good financial situation themselves.
Take a look at the second chart (bottom of "Page 1", the third actual page considering the title page and contents page). [0]
Revenue may be small, but profits are huge, and market capitalization (aka "wealth") is absolutely massive. And that market cap is what feeds retirement plans & pensions. So while Europe is taxing people, the US is growing profits and wealth.
The World Economic Forum had this to say about Europe's tech giants in 2017: "In total more than a third of European tech founders are based in the UK." [1] That doesn't bode well for the future, when your economy is stuck in old industries, and the leader is leaving the party.
BTW, hats off to the Finns - not sure what they are doing with gaming, but they punch well above their weight.
When it comes to creating wealth, taxation doesn't do anything but redistribute it. In order to actually generate wealth, you need capital, and people who use that capital more efficiently & effectively will become richer. It is a virtuous spiral. And what's important is that every one of those high paying tech jobs is one less low-paying job. Most of the low paying jobs have existed for decades in various industries (esp retail), but most of those tech jobs didn't exist 20 years ago. I can only imagine how many high paying tech jobs there will be in the US in 20 more years, even though I expect low-paying jobs to still outnumber them.
[0] - https://www.yardeni.com/pub/yardenifangoverview.pdf
[1] - https://www.weforum.org/agenda/2017/10/meet-europe-top-tech-...
Market cap is a myth based on the fiction that is the share price.
> So while Europe is taxing people, the US is growing profits and wealth.
Tell that to 23 million Americans who can't afford their next rent, or can't afford to go to the doctor.
How many low paying jobs are taken by e.g. a high paying e-commerce job? Hundreds surely. And if there are less low paying jobs you can pay someone less to do them because there are so many people looking for those few jobs.
Sure, it's a virtuous spiral if you're one of the minuscule number of people that the spiral is pointing to. Otherwise, you see it for what it is, wealth being siphoned from Us to Them.
Also, the level of political control that huge companies almost automatically exert greatly minimizes democracy, leading to things like the bottom 50% of Americans having almost no bearing on the political sphere, at least at the federal and state levels.
Not happy with 1 share? Save more, buy more.
Want cheaper shares? Found your own company and you’ll have infinite shares for free. You’ll have to make it successful afterwards, though, to raise each share's value up from 0. That’s what "They" did.
You seriously misunderstand how little money people at the bottom actually have, and how little access to the kind of credit you'd need to start a business. Like, saving for a car when their old one breaks down will probably take some people months or years. Saving to buy shares????
> That’s what "They" did.
A minuscule handful of them, if even that. For every Jack Ma there's a thousand Mark Zuckerbergs or Bill Gatess who were born with a silver spoon and will die with a silver spoon, as will 3 generations of their children at the very least. The descendants of the people who laid the railroad tracks, the large slave plantations, all of these people are the vast majority of the top. Even people like Elon Musk are still coming from a background of pretty high privilege. The people who were born in the bottom 50% that you have ever heard of (outside show-business) can probably be counted on at most a few people's hands.
But first you need to change your mind set. With self-limiting beliefs like those, you'll never get anywhere. Not only are they patently false, they don't help you in any way.
Get out of your echo chamber, hang out on same entrepreneurial forums (like this one!), read some inspirational books, learn how much is possible if you're just willing to try.
Plus, an economy can't run on business founders alone. It requires workers that actually, you know, do the work, and who are willing to be paid for a less than that work is worth (you know, 'profit').
If anyone is living in an echo chamber, I assure you it is not the 99%. It's the smug 1% hoarding wealth and justifying it to themselves by thinking 'anyone could do this if they were as smart/hard working/enlightened as me!' while forgetting the luck and connections and old money that got them where they are.
Sure, you can't succeed if you don't try. But you also can't succeed if you don't have anything to eat, and for the vast, vast majority of people, trying is likely to make that a real problem.
I also believe that it is our duty as society to make sure everyone can have a decent life even when not granted the same privileges others get for free.
Assuming everyone can put in the hard work and make it, you imply that everyone has or can learn "quickly" a markeatable skill, including the business acumen, the available free time and the mental/physical health required to succeed.
But the real issue is that even if everyone was able to try to get rich starting on an equally levelled field, our economic system can't allow everyone to succeed. We need poorer people to do employed jobs in order for their value produced in "excess" to be sent to shareholders and CEOs.
It just seems madness to me to have this global competition where the poor race against each other in order to be allowed to become one of the rich. We can do way better than this.
Competition is great, but at all levels.
Wealth creation is not zero-sum. Read PG's essay: http://paulgraham.com/wealth.html
Also some investment books: "A Random Walk Down Wall Street" "Rich Dad Poor Dad" "The Millionaire Next Door" https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_...
Have fun learning!
There would be lots of knock-on effects from this, such as more company perks to offset the large taxation of salary, but there are ways to combat that (tax benefits provided to employees as compensation). This would allow companies more capital to invest in R&D or expansion. Some of that money would go to higher wages (but if you distribute taxes more heavily to the wealthy along with this, it wouldn't affect median employee salary much).
A downside (among many, I'm sure) would be even more concentration of wealth in companies which might be used for non-free market operations, such as lobbying. It's all interconnected, so it's complex, but it also doesn't feel like we're in such a good situation socially, economically and politically that we should refrain from making large changes like that.
One can hold many opinions about the matter, and one can dispute that there is a net benefit at all, but it is clear that referring to this as "good for workers" is not particularly enlightening.
Right, must be good for those workers too!
As much as I support local, family-owned businesses on an individual level, I also recognize that for the vast majority of people, cheaper goods are much better for their lives.
I do wish we forced large corporations to pay for any government benefits that their workers collect, though, and continue to push for living wages that make sense at the local level.
Transparently, I ask that question because I’m wary of creating a system where employers have a direct economic incentive to not hire people who would be likely to receive government benefits. Nearly the last thing someone on government support needs is employers not wanting to hire them.
If that means (as I think it does) that corporations are not individually tagged for their specific workers’ benefits, so be it.
I’m also opposed (though less strongly) to creating a taxation system where taxation levels are not reasonably predictable, given enough effort. If I don’t know whether Joe is going to cost me $30K/yr or $50K/yr and I’ve got 500K “Joes”, that’s $10 billion dollars of annual uncertainty. Even if you cap the uncertainty to between 25% and 75% of the range, it’s $5B. For $5B/yr, I can find a bunch of other arrangements that give me less exposure (most obviously using subcontractors who aren’t themselves “large companies”, but even if they are, it becomes “their problem” which is better than “my problem”).
And if you look at the class disparity we have in the United States, the middle class is almost completely gone now.
You mean all of the workers at foxconn benefiting from their innovative suicide nets?
The situation is far more dire in the EU than even that would suggest.
Spain and Italy (#3 and #4 largest economies in the EU) will spend the next 20 years just trying to get back to where they were in 2007, and will have lost a minimum of 30 years to net economic stagnation. That's the good scenario.
Prior to the virus, France had seen zero net economic growth for 12 years. That's despite adding three million people to their population, which means the pie is shrinking for each French person.
Germany had seen zero net economic growth for 11-12 years. With the virus hit they'll probably go a net 20 years with zero GDP per capita expansion.
The same scenario is playing out across most of the EU's members. There's no growth to be found anywhere outside of the Baltics and Ireland (11m population combined), while social system costs continue to climb and demographics continue to age. You can see this erosion effect playing out for example in the collapse of EU spending on infrastructure (which has fallen below the US level as a share of GDP).
Who are you optimizing for?
Going by https://worldhappiness.report/ed/2017/ , figure 2.2, the US is happier than the majority of European countries.
>Who are you optimizing for?
I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
"Happiness has fallen in America
The USA is a story of reduced happiness. In 2007 the USA ranked 3rd among the OECD countries; in 2016 it came 19th. The reasons are declining social support and increased corruption (chapter 7) and it is these same factors that explain why the Nordic countries do so much better."
> I'm not trying to optimise for anything, rather I'd prefer people are given the chance to optimise for themselves how they spend their time and money, and the less bureaucracy they have to deal with, the easier it is for them to do this.
You've bought into the propaganda propagated by the ultra rich via cable news and other outlets in order to justify their continued accrual of more and more of the world's wealth: That economic freedom is just freedom from taxes - it's not freedom from ever worrying about going bankrupt or becoming homeless if you get sick. That society works better when nobody cares about the well-being of their fellow citizens, that the freedom to care about nobody but yourself somehow makes us stronger as a society, not weaker. That publicly run institutions are always just 'bureacracies' and 'inefficient' - not the solid foundations upon which other parts of society and the market can rest, which many public institutions prove every day, by freeing citizens and companies that rely on them from having to pay for one or more layers of shareholder profits, freeing them to invest in other things instead. The talking points you are reiterating sound good on their surface, but in reality they are just that, talking points. The reality of what the world becomes when they are used as policy is being felt all around the world these days.
Happiest countries don't have the highest suicide rate.
Nordic countries do have a significant portion of population living in areas where SAD is prevalent, which naturally causes increase in suicide rates. Yet they are not the highest rates.
And China, if anyone, has shown how protectionism, and making sure outside companies can only reach your internal market if they play by your rules, and favoring national companies over international ones, is a winning strategy in the 21st century.
The effective rate actually paid by the top 1% was around 42%, which is not much higher than now: https://taxfoundation.org/taxes-on-the-rich-1950s-not-high/. . The US had also emerged as pretty much the only unbombed industrial country after a global war, giving it a significant advantage.
>so thoroughly debunked by now
Debunked where? Here's a random paper I found showing a strong correlation between economic freedom and GDP: https://mpra.ub.uni-muenchen.de/49220/ . https://www.cato.org/sites/cato.org/files/pubs/efw/efw2019/e... also has a graph on page 18 showing a strong relationship between economic freedom and income per capita.
>What is it with this obsessive focus on supply-side economics, and complete disregard for the demand side?
Demand is a factor in short-term market dislocations, but demand cannot create long-term economic growth. Growth requires that some of the value created be saved and invested, in order to increase capital, and no amount of demand will compensate for a long-term fall in investment.
Ding-ding-ding - you hit the nail on the head! The US' competitive advantage and special position in the world, including all those fortune 500 companies, doesn't come from its special adherence to laissez-faire capitalism, it comes from other historic advantages. The supply-side trickle-down cult didn't start until the 70's and incidentally real median purchasing power in the US has been in decline ever since.
> Debunked where? Here's a random paper I found
Here's a very non-random book I found: https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Ce...
Also, do I really need to remind you that correlation is not the same as causation?
According to Wikipedia, that book makes the argument that economic equality will grow over time. It doesn't show that countries with more economic freedom grow slower. To copy from the "Criticisms" section of that wiki page:
" According to Financial Times columnist Martin Wolf, he merely assumes that inequality matters, but never explains why. He only demonstrates that it exists and how it worsens.[36] Or as his colleague Clive Crook put it: "Aside from its other flaws, Capital in the 21st Century invites readers to believe not just that inequality is important, but that nothing else matters. This book wants you to worry about low growth in the coming decades not because that would mean a slower rise in living standards, but because it might ... worsen inequality." "
>Also, do I really need to remind you that correlation is not the same as causation?
Indeed, fortunately we also have economic models suggesting such a relationship should exist so it's not just blind correlation.
A pie chart has 360 degrees. Give 359 to a small subset and you are left with 1 degree to be fought over. You cannot have super-rich people without having super-poor people. Look at the world, the real one, this one here where the majority of people are dirt-poor.
Meta-comment: I find this style of argument (make one claim, have the claim debunked, make a different claim and say "see I was right") to be very annoying, and I wouldn't mind if it disappeared from HN.
I will very happily argue for any of the points I've made, and I promise not to change topics and stay with a single point as long as is needed.
The middle class is basically paying for the rich and poor and they don't have money to spend on the economy. We can't support our companies because their products are actually more expensive than outside products (companies pay a lot of taxes too).
It's more than known by every good economist that overtaxing isn't good for any economy.
[0] https://en.m.wikipedia.org/wiki/List_of_average_annual_labor...
And in all the countries the middle class pays for the rich and poor... unfortunately.
The US is largely socialism and profits for the corporations and free market absolutism and costs for the working poor.
Doesn't seem like it to me.
These kinds of statements don't really add much to the debate - they sound like political slogans. To add to some light instead of just heat to the discussion, it is better to explain what you are saying. How are you defining poor? What tax rate do you think this group should pay? What tax rate do you think corporations should pay? How does that compare with other countries? etc.
(I don't mean to single out this particular posting, as I have seen political slogans used throughout this thread.)
Something like tax rates statistics wouldn't tell you whether those taxes are actually paid - but tax revenue statistics do exactly this.
Imagine a person in Portugal has a 1000€ salary, and the state takes 40%, the person has 600€ to live.
A person in Germany gains 3000€, the state takes 60%, the person has 1200€, double the Portuguese.
Cost of living in Germany is higher, but not twice that much. And the cost of living already factors in some taxes, such as VAT, so it's not an apples-to-apples comparison.
Hm...that's a good point actually - net PPP-adjusted household displosable income is definitely lower in Portugal: http://www.oecdbetterlifeindex.org/topics/income/
The actual taxes paid aren't as important as the incentives they create.
The winning strategy depends very much on what stage of economic development a country is at. Developing countries often benefit from some level of protectionism (this is the "infant industries argument," which Alexander Hamilton proposed), but developed countries benefit much more from lower trade barriers. In 20 years, it will be China that is pushing for developing countries to lower their trade barriers.
The problem isn't taxes, the problem is founders who believe they are above the social contract. They want the benefits of a highly stable society with high taxes and high standards of living, but they don't want to pay their share of keeping that system alive.
The world needs more founders anyway. They are the ones who created the amazing wealth we are enjoying right now, not the politicians, bureaucrats, regulators or commissioners.
There is no such cycle in Europe, and it’s all because the lack of stock options. Without them, startups only offer very low pay with little to no reward, and good luck trying to attract the top talent startups actually need to succeed.
At vest, in the US, a percentage of shares are immediately sold to cover taxes.
With illiquid stock - as in a startup - where there's no public market for it, and no one to sell it to, you can't really do that, and you're creating a tax problem for your employees.
The company can pay those taxes on your behalf - but that's expensive when a startup is explicitly paying in stock because they need the cash to grow.
Really? I thought most startup get a successful exit, result into their employees being modestly compensated, probably on par with the counterparts in mega corps.
Do most startup successes (which themselves are quite rare) result in most employees becoming rich? I've had my share of successful startup experience as an employee, and there was a nice payoff, but I'd hardly call it "rich" in any accepted definition of the word. At best, it's made up for the time I spent being underpaid compared to market rates.
I don’t think this is accurate. Even in successful startups, most employees don’t get rich. Yes, some manage to navigate the complicated financials and can afford to execute their options, but typically only valuable roles are offered stock options and not all employees can afford to execute them.
Even if the company is “successful” and goes IPO, employees that execute their options can lose money while trying to execute their options (many Uber employees right now and plenty of 1999-2000 IPO employees).
In short, stock option incentives are gambling. I’m not sure they are a net positive even for the USA. Yes, we get harder workers for cheaper, but this depends on VC and Fed Reserve money being plentiful, which comes with other costs.
For early stage startups in the valley, pretty much all employees receive options. How many options, dilution and if if a positive exit will occur are all variables, but generally everyone gets an option grant.
Employees who don't stay long enough to vest (much or at all) don't get rich.
Employees who work in roles like office admin, security guard, janitor, intern, etc. usually aren't offered options (frequently because they are outsourced or independent contractors, etc). I'd wager that engineers, designers, and management are consistently offered options, but most other roles vary. Sales frequently insists on large cash commissions, so management probably wouldn't augment that with expensive early stock options.
There is inherent risk in owning stocks -- you need to time your exit well or a wise purchase in options/RSUs can turn into a financial liability or can significantly cut your profits if you exit the stock at the wrong time. I have a friend who exited FSLY as soon as their options execution turned to long term cap gains (resulting in a comfortable profit), but they could have more than doubled their profits (and been borderline "rich") had they stayed in until peak.
Employees don't always time their options/RSU executions well (because life is unpredictable). There is an opportunity cost to risking startup life at a lower up-front salary than working at a larger more stable company that pays more but offers no stock benefits.
Employees can't afford to execute their options/RSUs at the right time (eg. I could have owned significant CloudFlare stock if I was better at saving money while in university).
Employees don't always spend the money to gamble on options/RSUs and their tax obligations because they don't anticipate the company worth much (which can be a misperception or a lack of trust in management/owners).
What would Europe stand to get from having more Fortune 500 companies? It doesn't seem like it's helping in the US at all. On the other hand, Europe still has a much better lifestyle for people who are not rich.
We must end the concept that nations are subject to the market and corporations whims. That's the narrative they are spreading, but they can't do without Europe's profits, so it's better we realize that as states we have more power over them than they'd like to admit.
If it's (2) wouldn't that just incentivize businesses to sell to France but not employ French people, and if it's (1) wouldn't corporations just offload the cost of that tax onto consumers so that good are just more expensive in France?
I would love to see how that turns out for corporations.
Just lower your tax rate to match the most competitive jurisdictions, easy.
I think the biggest hindrance here is that transfer pricing is a complicated issue, that most voters don't understand the mechanics of, so there's not been a lot of pressure on politicians to solve it. It's been much easier to just lay the blame on immigrants or whatever, than to actually attack the root cause of the issue.
Countries aren't all identical. Ireland needs to be allowed tune its economic policies based on what it has to offer. It doesn't have the population of France, or the location of Germany. It has english speakers and a reasonably well educated workforce, two factors that aren't unique to it. A low corporation tax policy counts for a lot.
Furthermore, in the case at hand, while Ireland is free to set their tax rate to something low, like 12.5%, it needs to apply this to all companies, not allow any of them to fiddle their way to only paying 0.005% like Apple did. The commission considers this illegal state aid to a company, and I'd tend to agree. It's unfair competion when a company only operating in Ireland needs to pay 12.5% in corporate tax, while an international company with a creative ownership structure involving the Cayman Islands can pay effectively 0%.
[1] https://en.wikipedia.org/wiki/Base_erosion_and_profit_shifti...
Even assuming that's the case (sounds far fetched to me), would that mean they now wouldn't have to pay a fair tax rate?
They would, but you have to define "fair" first.
Many people may no realise this, but this exactly holds for African countries too. As the continent develops, some countries will become certain roleplayers that essentially are already apparent now, for those willing to go and look for it.
South Africa is the financial capital of Africa, and it would do most people here good to emphasise that. It is an entry point into the rest of Africa (despite, or because of even, being the furthest away from Europe) and its long term trajectory is probably going to remain in what I guess we could call facilitation.
If we compare SA to Ireland or Switzerland, again, they are countries that attempt to facilitate development. I think tax needs to be a topic in its own right, and the exact properties of a country is also a topic in its own right.
Luxembourg will always be forced into a niche, and whether that niche is tax based on not depends on the options at their disposal. Wealthy people see tax as an expense just like any other and the onus is on ordinary people to build inherent value rather than simply financial value.
But you need cultural momentum for this. South Africa's niche role is compounded by cultural and African factors and I am first in line of those that want a foundational based economy, rather than a facilitation based one. But you really need the will to work hard and build inherent value. My final point is simply that one can complain about countries that focus on tax (or tax evation) but the real question is: What else are the options. (And I'm sure there are opportunities waiting.)
That is not true. They employee a few thousand people in an industrial estate outside a suburb of cork in fairly low ranking jobs. If they were to disappear overnight they would doubtless have an impact but not a fraction of €14bn
And if Apple did leave it's not unrealistic that the reasons that made them leave would also be on the minds of the other multinationals in the area.
The country needed all it could get. And it eventually did very well, then screwed it up in the Global Financial Crisis, but now seems to be doing quite well (until Brexit starts to have an effect).
https://en.wikipedia.org/wiki/Tiger_bread
1) Create a successful company.
2) Create a new company in Ireland [$400 office and a phone].
3) Transfer all revenue creating items to Ireland company - leave all cost centers in your host country [US, Germany, etc].
4) Write on your blogs how you back social justice!
That stuff only remotely works with US companies because its tax regime wasn't a territorial one. As of a few years ago, the US finally transitioned to a quasi-territorial tax regime, which plugged some of the holes, but not all of them.
And you don't find German (or Japanese, Australian, &c.) multinationals doing this kind of thing because they have _proper_ territorial tax regimes. The US does not, and this kind of thing will continue to be a problem until the US finally does do what the rest of the world does regarding taxation.
And it would be nice if they did the same regarding personal taxation.
I fully agree with the former, but—to an extent—disagree with the latter.
The thing that bothers me about this lawsuit is the fact that it is in essence an after-the-fact tax increase. If they want to reform tax law, then it should be forward facing, not trying to reverse previous established policies. Particularly not for the length of time this covered.
Globally, the US, EU, (UK now), Canada, etc, all need to get their ducks in a row and get taxation sorted out in a sane way.
There are insane sums being spent in organised campaigns to limit the ability of governments to interfere with this ethic of systemic financial capture.
Imagine a hypothetical country the Amazing Fiefdom of Jim or AFJ for short. AFJ seems like a good tax haven at first glance, they have 0% tax on offshore revenues, companies can be set up there for a modest fee of $100, you don't need to be a citizen or ever visit, they don't ask you to file much paperwork and they reject all law enforcement paperwork queries for the little paperwork they do have.
But alas, the ruler of the fiefdom, Jim, just sometimes takes stuff he wants. A billionaire who had hidden $400M and a big stake in Amazon via a company in AFJ one day discovers the company was now mysteriously owned by Jim, no way to dispute it!
If that happens with some tiny island that used to be a British colony you can get it unwound, you'll need to pay some expensive lawyers in London to make that happen so it's not an option for the average person on the high street, but if you've got this sort of "need a tax haven" money you can afford those lawyers and get Jim dragged over the coals until he agrees to give back your stuff.
This faith in the rule of law is why Russians hide money in England not in Russia. If you hide stolen money in Russia, and one day Putin wants the money, he just takes it and if anybody complains maybe they "commit suicide" by hurling themselves off a tall building entirely unassisted...
The EU argument was that Ireland's "previous established policies" were against EU treaty, and so the (alleged) special deal that IE gave Apple should be considered annulled since it was invalid from the day it was signed.
> On this basis, the Commission concluded that the tax rulings issued by Ireland endorsed an artificial allocation of Apple Sales International and Apple Operations Europe's sales profits to their "head offices", where they were not taxed. As a result, the tax rulings enabled Apple to pay substantially less tax than other companies, which is illegal under EU state aid rules.
> This decision does not call into question Ireland's general tax system or its corporate tax rate.
* https://ec.europa.eu/commission/presscorner/detail/en/IP_16_...
* https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
Shouldn't then Ireland pay it (or act as if it was paid, and paid whatever it would have paid from it to the EU budget).
Yeah, lets treat this as a fine and fine them $1 for every million it cost the other EU members. Lessons learned: you can get away with everything if you are just bold enough.
By agreements they signed they are supposed to collect the taxes in a fair manner, so requiring them to collect the taxes they didn't seems to be the least they can be required to do. That would also have the side effect of making every company think twice about using an EU country as a tax haven.
Or is nothing Ireland does binding, until someone else with real power has counter-signed it?
Whatever ideas you have about the state needing to have the highest authority in the land, if we follow that through by not holding them accountable for agreements made, then that actually substantially dilutes the power the state can have.
Ireland signed on to the EU and several trade agreements before that. Until it quits these it is subject to their rules.
> If you negotiate a deal with the highest authority in Ireland, and they sign off on it, are you done?
Any contract you sign in any country can be invalidated by a court.
Sure. If your employment contract prevents you from taking other work, you may be fired if you break this. You may also have signed up to binding arbitration by some weird court. But normally the 3rd party (your weekend employer, who did not sign) cannot be penalized.
That's what points out how much sovereignty has been given up by Ireland. It has signed up something much more than a trade deal. A foreign court can not just strike down laws it passes, but re-write them retrospectively a decade after the fact.
No law has been sturck down. No law has been rewritten. No law has been applied retroactively.
A deal was found to be illegal, based on the laws at the time, so was anulled (as any illegal deal would be).
This was appealed, and the court found that the facts of the case had been misinterperated (ie they're arguing about what counts as state aid, not whether state aid is illegal).
And not just Ireland's.
And that's what I'm saying. If your legal system is united to this degree into a larger framework, then that new thing is the locus of sovereignty. It is much more than a trade deal. (That doesn't mean it's wrong, or a good idea or a bad idea. But it's a big change.)
What you're advocating for is despotism.
And I think cases like this €13bn tax bill are half way there. Did it really spend 12 years working its way through neutral courts, like some slow squabble over who inherits the family pizza parlor? Or was there a bit more political input now that the EU feels that US tech giants are a geopolitical threat, in a way that they didn't 12 years ago?
And so the sovereignty question is not just on whose soil the high court sits, and who writes the nice rules it officially follows. It's about who gets to decide which big cases to let slide, and which to go after.
If you sign a deal with Nevada to sell products in the entirety of the United States, you expect federal laws to apply, don't you? Well, EU is not a federation like the Unites States, but it's half-way there. You cannot ignore Bruxelles when dealing with the Single Market, just like you cannot ignore federal laws when doing interstate commerce in the US.
I have found that EU is really something hard to grasp for non-European. And to be fair, for most Europeans too. If Ireland wants its sovereignty back it can exit the EU (and the Single Market) at any time. But then of course it won't be the gateway to the Single Market for American companies anymore...
> hard to grasp for non-European. And to be fair, for most Europeans too
Yes, I think the degree to which this thing is a super-state (or at least claims to be one) not a trade club is not fully appreciated. Not least by the voters in whose name it was created. It's in some gray area between a federal state and a treaty, and cases like this are illuminating as to precisely what shade of gray.
About the EU, "The European Union is a unique economic and political union between 27 EU countries" [1] Who believes it's just a trade club? I'm born in France, grew up in France, and never thought of the EU as just a free trade zone. It's a weird belief to me, and obviously not one anchored in any kind of reality. But that might simply be because it hasn't been sold that way to French citizens, maybe Irish people were told otherwise?
But forget about the EU. When Apple setup its European headquarter in Ireland, it's to sell its goods in all of Europe, what we call the Single Market. The Single Market is not the EU. Apple could have set up its European headquarter in Iceland or Norway, countries that are outside of the EU, yet inside the Single Market. And the same European laws would still apply. These laws are not the rules of the EU, they are the rules of the trade club.
When you enter a member of the Single Market specifically with the purpose of selling to all the members of the club, you can't play dumb and claim you didn't know that the rules of the clubs applied to you.
If Ireland wants to leave the Single Market, it can do so freely. It could even leave the EU without leaving the Single Market if it so wishes, but the rules of the Single Market would then still apply. Trying to stay within the Single Market while ditching its rules is, as demonstrated very thoroughly by the UK, completely impossible.
[1] https://europa.eu/european-union/about-eu/eu-in-brief_en#fro...
When joining the EU, Ireland promised to have (tax) policies consistent with certain principles. The 'side-deal' with Apple alleged (according to the EU) broke those principles.
If Ireland doesn't want a higher authority looking over them they can leave the EU. This is one of the arguments made by the Leave side in UK Brexit: we don't want Brussels breathing down our necks.
The EU is not getting paid anything. The EU said that Apple should have paid Ireland more.
It's like the EU saying to Germany "we thing that you are giving an unfair tax advantage to BMW compared to Renault: you need to collect more taxes from them".
Yet the EU sat on this for 12+ years allowing this agreement to continue. If they felt this was a concern, they should have addressed it in 2004... or any year between.
Same principle. Statutes of limitation exist for a reason.
Ireland is the one that broke the treaty, not Apple. Apple played correctly within the rules & scope available to it, and is being retroactively told that those rules, in fact, did not exist, though certainly every other rule does exist, except for those that might not, depending on our decisions in twenty years.
And yet in recent years, the middle class is more and more blamed for the inequality and other big problems of the world.
In multiple EU states, there's no mainstream parties representing the interests of the middle class.
At the same time the truly rich are laughing on their way to the bank.
https://en.wikipedia.org/wiki/Common_Consolidated_Corporate_...
Companies should have never been taxed based on a virtual, and fundamentally nonsensical, figure as the location of their headquarters. They should be taxed based on substantial things, like (the location of) capital, labour and sales. This is what CCCTB establishes. States are still free to set the tax rate as they wish. It's just that then the companies can't escape with the turnover money to another state, essentially robbing the state where the profit was generated.
This is the most important tax legislation of this day. No other debate about taxes, like the rate itself, or harmonisation of the rates across states, makes sense before this gets implemented. The reason is that now the tax rate is evadable and only stifles local/small businesses who don't/can't cheat. Sadly, there are few states that are successfully blocking this: Netherlands, Ireland, Malta, etc. But I hope to see this one day.
I.e the ones benefiting from the current regime, and to lose in the reformed one.
It's a very interesting line of thinking when a company that produces new value and makes money by providing the value to the customers by voluntary transactions (and regardless their location) somehow is considered a robber of the state that produces nothing.
How much of these products are designed and built in these Europeans countries though?
Leaving aside cases of companies that actually have legal entities in a location (such as Apple), the comment that started this sub-thread was about companies that don't necessarily have any nexus in a location, and just provide services to people regardless of where those people are.
You have to switch we and they. We are not Apple, but we are the people of a state.
There is another poison pill hidden in the public services: because they look free to the economically untrained eye people tend to overuse and overconsume them. That's why you see so many college graduates in careers that end up having no work use, thus becoming wasted human capital. If people had to pay for their education they would see the costs up front and be more efficient with their decisions.
As you said, these are "monopolistic public services", so for me it doesn't make sense not to have healthy people insured. The more healthy people are insured, the lower premiums are payed by everyone, and in case of crisis, no one gets left behind.
Are there examples of what you are describing happening in the world?
Amazon is already paying for using the roads, since they are by large toll-roads.
In the Portland, OR area (where I live) there are zero toll roads. Maybe that's why I am biased to feeling like state funding these projects is necessary. If Amazon (and anyone else that uses them) were paying for them, perhaps I would think differently.
Gas is much cheaper in other states, I wonder how they pay for the same roads.
I actually always viewed the failure of the bridge project as a sign that people won over bureaucrats. I felt like it would add a lot of traffic congestion and not solve problems the right way. I would like to read more about what you are suggesting, do you have any links that speak to your viewpoint?
Whether state(s) should be in the business of "producing things" is for another debate, but it's not controversial to claim that they should be in the business of taxing things.
Now, you can go about taxation the stupid way, collecting unreasonable amount of money from the wrong people/companies for the wrong things. Or you can do it the smart way. CCCTB is the smart way.
I'm not that I'm against making money. But making money should be taxed, preferably the smart way.
This is fundamentally the right answer, but don't underestimate the political difficulty in getting there.
Taxing "profits" in the location of the headquarters was always a seduction. You have an international company paying developers in California, manufacturing products in China, selling them in Germany, but if their headquarters is in France then France gets a cut of the profit from all of that whether they had anything to do with it or not. Very nice deal for France.
Until Ireland sets a lower rate and the company moves their headquarters there, and then the crying starts. No, it was a stupid way to tax from the start, not when they moved the headquarters to Ireland.
But you tax capital and labor and sales, well, the implications of that are different. Now if they have operations and employees where you are, they can't avoid the tax, except by moving out. But uh oh, if the taxes are too high they might do exactly that, so now you've got to worry about the rate again if you don't want to lose jobs to other countries. Or your people would have to accept lower salaries to keep that from happening. And on top of that if you lose the jobs you still lose the tax revenue.
The company also can't avoid taxes on sales if they want to sell to your people, but if the company wasn't in a monopolistic industry to begin with then it could easily be the customers paying most of those taxes and not the company.
So the taxes get paid, but so do the true costs of taxing things heavily. The free money everybody always wanted was never really available. And there may be some wailing and gnashing of teeth as people figure that out.
For one thing, sales taxes are on revenues rather than profits (because the entire price is profit to somebody, and otherwise you're giving incentive to corporate shell games again), and that means the tax could exceed the profit to the entity making the decision.
Also, any non-zero profits aren't necessarily better than the alternative, because the alternative is to deploy the same capital somewhere else. Your factory is producing as many widgets as it can for a unit cost of $5, France was paying $10, now with tax you're only seeing $7.50 of that, but people in Oregon (no sales tax) would pay $9.75 so it's now more profitable to sell to them instead. Or you could stop making widgets entirely and turn your factory into condos if that's now more profitable. For that to make sense the profit from widgets doesn't have to be zero, only less than what you can get from doing something else.
Meanwhile if the customer in France still wants the widget, they can get it, but they've got to pay enough so that the after-tax price is still ~$10. So in that case the company keeps making widgets and selling them to France but it's the customer eating the tax.
1. It avoids endless arguments about where the profit is 'really' made, i.e. relative arguments about the value of labour vs capital vs equipment vs offices etc. However bad or stupid you think these arguments are, those would be far worse.
2. Corporation taxes are highly inefficient taxes to begin with. It puts countries in a form of competition that should drive corporation tax down to zero, which economists believe is a better state to be in.
https://www.forbes.com/sites/timworstall/2016/05/24/french-t...
Like, as a concrete example, suppose you're an American who owns some car washes in France. $15m in sales, $10m in costs, $5m profit. You could do an equity-for-debt swap, and own the exact same assets in the form of bonds that pay $3m per year and a more indebted company with a $2m per year profit. Poof, you've just moved $3m of European profits and transformed it into $3m of American interest income. Maybe not the best idea, but if you live in the right jurisdiction...
Most people don't realise it's US tax law which allows US companies to defer paying taxes on foreign profits indefinitely. Without that law there' would be no loophole.
https://ec.europa.eu/commission/presscorner/detail/en/IP_16_...
Selected quote:
"The role of EU state aid control is to ensure Member States do not give selected companies a better tax treatment than others, via tax rulings or otherwise."
http://curia.europa.eu/juris/document/document.jsf?text=&doc...
* defence
* education
* infrastructure
* health
* etc
But our political systems are so corrupt there's nothing can be done about it because they just line the pockets of the political parties who in turn make sure they never have to pay their fair share.
Corporations have become more powerful than ever thanks to globalization. Globalisation has also reduced individual goverments power over land/resources. (this is why supranational is a thing).
This is about Ireland abetting Apple (and every other large US tech and pharma firm) to not even pay the 12% but pretend that all of its EU profits were created in Bermuda, BVI or some other zero-tax offshore tax haven. (Via the Double Irish Dutch Sandwich legislation they offered until this year, or the newer and improved "Patent Box" law.)
Getting there politically is a hard and long process.
The EU exists partially to prevent large multinational companies from playing smaller countries against each other (by having a common market).
Personally, i think european integration is necessary to keep the continent afloat in the era of globalization. Europe is a continent that is highly fractured politically, and having smaller nations is a problem against gianst like the USA and china.
I was always skeptical that this decision would stand up under appeal, since the argument that they received a special benefit from these tax rulings (relative to other multinationals) never made much sense. They were actually worse off under this arrangement than they would have been if they had just done the proper double-Irish in the first place, like Google and Microsoft and everyone else.
We have come to accept that certain tax payers (ie. corporate or well lawyered individuals) can chose where their revenue should be taxed. It think it has become obvious that this freedom distorts the spirit of taxation in most (all?) countries. I think it is fair to prevent double taxation across countries but IMHO revenue should be taxed as close to the source (revenue-generating-event) as possible.
> "We're proud to be the largest taxpayer in the world, as we know the important role tax payments play in society."
The old PR line Apple (and others) have been repeating ad nauseum... No one questions your place in the ranking, people care about the proportion (rate) you end up paying. If you're among the largest companies in the world by revenue it's not surprising that you'd be among the largest tax payers.
And ultimately that is what happened: the money Apple made outside the US was eventually taxed when they repatriated it into the US.
https://www.wsj.com/articles/apple-to-pay-38-billion-in-repa...
Normally you tax profits, which are gross revenue minus cost of goods sold (and yeah, I'm oversimplifying a bit). But in Europe, Apple has only profits, no cost of goods sold at all, since the costs are incurred in the USA. This would seem to lead to super-high taxes everywhere else, where profits are close to 100%, but huge losses in the USA, where the costs for the whole world aren't met by enough gross revenue to cover them.
To avoid that, the European entity takes on a share of the costs by "buying" from the USA entity. And that's where the games come in. What are they buying? The physical goods? Are what markup? Are they also buying the advantages that come from the Apple name and logo?
They can basically set the cost of that IP to whatever they want, and therefore show as much or as little net profit as they choose. Which is what they've been doing. Again, oversimplifying a bit, they recorded all European revenue through Ireland, and set the cost of product + IP + ad share + everything else so high that the net profit was very, very, very low, and sad that very, very, very low number is what they had to pay taxes on.
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[1] https://www.apple.com/ie/contact/
- then the remaining profits are taxed again by the US government when Apple repatriates them to the US.
- Then the remainder are taxed again by the state Apple reports them in.
- Then they are taxed again by the federal government when Apple shareholders receive the remainder as dividends.
- Then they are taxed once more by the Shareholders state, finally allowing the shareholder to spend (or reinvest) what remains.
Scenario A: Apple (USA) pays $200 for an assembled iPhone from their Chinese manufacturer. Then they turn around and sell the phone to Apple (Europe) for $1000. Apple (Europe) then sells the phone to a customer for $1000. Apple (USA) records a profit of $800, Apple (Europe) records a profit of $0.
Scenarion B: Apple (USA) pays $200 for an assembled iPhone from their Chinese manufacturer. Then they turn around and sell the phone to Apple (Europe) for $200. Apple (Europe) then sells the phone to a customer for $1000. Apple (USA) records a profit of $0, Apple (Europe) records a profit of $800.
In scenario A the money is "made" in the USA. In scenario B the money is "made" in Europe. Apple argues that since they are paying taxes on that money in the USA, they shouldn't have to double-pay taxes to Europe as well. Europe disagrees because they want a slice of those taxes.
(Note that no complex IP transfer schemes are involved here, it's solely a question of which entity records the difference in the retail price of the phone vs the cost of goods sold. Also note that in either case, sales tax/VAT is paid to the appropriate country.)
There are proposals for updated international taxation rules to prevent this issue - for example this one: https://en.wikipedia.org/wiki/Formulary_apportionment The problem is to get the OECD to agree on updating this.
Wouldn't it be simpler just to tax those things? We already collect those taxes, and can set any rates we wish. Why not just abolish the the tax on corporate profits?
What is the source of the revenue of an item sold in country A, manufactured in country B, and designed in company C?
What if it was shipped into country A, but the shipper has no nexus in that country? What if it was manufactured in country B, but the designer has no nexus in that country?
Add in parts made in one country, and assembled in another for more fun.
The new US corporate tax plan has an interesting approach of AMT on corporations of X% of global income or Y% on US income, whichever is more, with AMT credits for foreign taxes paid; and the income doesn't need to be repatriated to be taxed. (IIRC, X is 10, Y is 20). Of course, that only is effective if the company is US homed, if it only has a US subsidiary, that can't be used to levy a worldwide tax.
One rather curious feature of this case is that if the ruling had gone the other way, and Ireland had been on the losing side, its "punishment" for breaching EU law would have been to receive a large amount of money: taxes the Commission said were owed by Apple.
About 30% of Irish GDP is "leprechaun economics." Funds that transfer through ireland without touching anything, and "would disappear if you tried to touch it." If you look up financial statistics that rely on gdp (eg oecd stuff), they're nonsensical.
This isn't a normal "bidding for jobs" situation.
We recently had an election that upended political norms. The two major parties (like US republicans and democrats) now have <50% of parliament seats. So they now collaborate, almost like a single party. They even negotiate with third parties (recently the greens) jointly.
What tipped the balance was a "left wing wave." The largest party in this wave is Sinn Fein, a nationalist-republican party. Their campaign focused more on left wing issues than republican ones.
In any case, this whole leprechaun economics thing is rarely mentioned. Ostensibly, the political turn should have turned on leprechaun economics. Almost no one mentioned it though.
The benefit to Ireland isn't clear to me. Apple, Google, etc do have real operations here. They employ people and such. But, it's not clear how these relate to the tax evasion. I have never heard an explicit articulation or quantification of benefits.
Politically, I think people just assume that it's beneficial because it's sneaky. A weird expression in irish chitchat is "say nothin!" It's part of a whole dialect (or kant) of gestures & phrases to communicate collusion. It's a part of irish culture, and it plays here.
The upshot is that no one really understands why we have this system, but no one wants to give up the game by talking about it.
$13bn is a lot of money here, about $3-$4,00 per person. It's shocking how little political debate we have on this... not even from those who want to spend this money.
https://news.ycombinator.com/newsguidelines.html
all 0 requests to stop, just constant downvotes for telling people, rightfully, how much boot they're guzzling
3 months ago: https://news.ycombinator.com/item?id=22939116
9 months ago: https://news.ycombinator.com/item?id=21198326
Also, your account's posting history is egregious: https://news.ycombinator.com/posts?id=mdszy. This is not a borderline call. Accounts that post like that get banned here, regardless of what they're espousing.
The tricky part is pinning this down in legislation, although viewing it as collusion might make this somewhat easier as there are already laws against collusion and monopolies that you might be able to leverage.
They have since reportedly closed down this option in their tax code because of optics, and they probably don’t need it so much anymore.