I'm glad. This will encourage those slacker big firms to work harder to make money. They will stop spongeing off the education system and infrastructure paid for by the full tax paying companies and individuals.
(N.B. I'm ironically copying the language used to describe people who are might or might not be working but still depend on government programs for food, housing, etc)
Which means that all costs (incl. expected profits) are priced in, instead of being partially subsidized through tax breaks (and thus paid by everyone, not just the consumers that use the products).
That also levels the field a bit in that companies large enough to run departments that optimize for such loop holes have less of an advantage over the small fellows in the garage.
I have two friends from Ireland who work at a tech company who recently opened an office there. They love the work and say that it is easy for them and their friends to get jobs because of all the companies coming there. My company is thinking about opening a European office, and Ireland is under consideration. This move might slow or stop companies from coming to Ireland.
Noone is opposing tax breaks that countries give to companies incorporated in that country... as long as the tax breaks only apply to the country in question! However, if Google can pay lower tax on profits generated in the UK/France/rest of EU, by virtue of it being an Irish company, that's tax avoidance, plain and simple.
Everybody wants the benefits that tax money gives society, but nobody wants to pay for it.
Companies don't exist in a vacuum, as evident in that very few companies prefer to put their offices in the middle of the sea or deep the jungle. They benefit greatly from infrastructure of our society, and it's fair that they should pay their share to build and maintain it.
>"Everybody wants the benefits that tax money gives society, but nobody wants to pay for it."
There are a lot of people who think that much (if not most) tax dollars go to waste, so they do not want to pay because they think that taxes are funding harms to their fellow citizens and foreigners. I am one of those people, and I do not want to be responsible for hurting my fellow man.
If I take your money, then give you something which you must use, or would have to pay for a second time if you did not, your use of this item or service is no endorsement of my action.
I use the roads which I (and all my fellow citizens) are forced to pay for, at least partly because the government has crowded out all the alternatives. With respect to firefighters, I would be very happy to return to the system where the insurance company provided fire-fighting services, as was the case before the government took over the industry.
I have often made the case against policies that greatly benefit me (financially and otherwise), but at an unacceptable cost to others, and I am sure that I am not alone in having done so.
You make a very fair argument. The real question is, how do we decide what is fair for each of us to pay?
Companies playing legal games around taxes is exactly the behavior that the complicated tax code incentivizes. Play games, get money. Are corporations not supposed to play? It's parallel to programming productivity measurements. If a company starts counting LOC and rewarding it, they are going to get precisely what they asked for: More lines of code.
If you have any tips on how I can avoid paying taxes, please share them. Is tax avoidance supposed to be wrong? Should I feel guilty about my own personal tax avoidance?
The companies in question are only there because the Irish government effectively legalised a form of tax evasion. These companies are not paying their fair dues, and their employees are also indirectly profiting from it. Can't say I feel sorry for your friends - their free ride is over and they'll have to join the global job market on a more equal footing with the rest of us who pay our fair share of taxes.
There's the grey area where companies are exploiting tax schemes in unusual ways and the tax authorities have not yet declared whether those complex schemes are legal or not.
Immensely wealthy multinational corporations have a lot of money to spend on lawyers and accountants, so while these companies are probably not evading tax the avoidance schemes they come up with are sometimes not legal requiring them to repay.
Don't forget that tax is part of law and so there is what's written and how that's interpreted by the courts. Until you've had case law there are areas of uncertainty.
Certainly in the UK there's a big difference in public perception between different levels of tax avoidance. Someone who reduces their tax burden to about 30% - fair enough. The same person who reduces their tax burden to 1%? They're taking the piss.
There is no such thing as society. There are individuals who have views which may or may not be properly or partially informed. So whose view shall we take on fairness? Whatever let's stop talking about 'what society thinks'.
OK, let's redefine 'society thinks' as - "The prevailing opinion of the voting public in a democratic nation, whom the nation is allegedly run by and for."
Perhaps you'd prefer to use the term 'electorate'.
Regardless, the meaning was clear and your objection rather ridiculous.
At a global scale there is no concept of "fair dues" that will ever get global acceptance. "Fair" in this context is an emotionally loaded term designed to create an adversarial reaction in the populace, an "us vs. them." The politicians who use it are manipulating, not informing.
At a global scale, there is only law. If countries want more taxes, they have to change their laws, and be prepared to deal with the unintended consequences of those changes.
Do you also feel that nearly all YC and other SV companies, by registering as Delaware S Corps despite really being based in Cali, are not paying their fair share of California state corporate taxes?
Fairness is subjective. As such, it is not very meaningful to discuss "our fair share of taxes." Ideal communists will substitute "100% of profit" while ideal anarchists will substitute "0% of anything".
Most businesses prioritize their own market value, and subordinate all other motives, including apparent political posture, towards maximizing that one metric. Therefore, they only pay taxes to avoid the negative effects of not paying taxes, rather than out of any perceived moral obligations.
The companies are there because the optimization process that involves jurisdiction shopping determined that establishing a business presence in Ireland provided greater benefits than the other options. There can be only one "best" jurisdiction for any given business entity. Complaining that someone else's seems to be better for more entities than yours is just sour grapes.
If you can't compete on a tax cost basis, there are other ways to attract business: a zero-corruption bureaucracy, privacy or secrecy for principals, reduced reporting requirements, reduced time from initial filing to practice, ironclad and proactive intellectual property protections, strong infrastructure, rock-solid stable units of accounting, or any of dozens of other points that may provide business value that more than compensates for the tax burden.
So fairness is a red herring. It is the objective value that is provided in proportion to the taxes taken that determines whether taxes are "too high" for a business to bear.
I don't really understand why this is an issue.. So the major countries in the EU are upset that companies don't want to operate out of a high tax zone, so they go to countries with lesser tax. Rather than lowering taxes, they "twist the arm" of countries who need the (all-be-it less) tax revenue the most.
Seems to me that countries such as France, U.K., etc. are basically acting as robber barons.
The EU promotes fiscal and regulatory competition and mobility of people, companies, and capital since many years. But as soon as there's true competition, the bigger ones (with plenty of wasteful spending) don't work on themselves but bully the smaller competitors into compliance.
The reason EU cracked down on Ireland is because it offered special deals where Microsoft and other select multinationals got to pay lower corporate tax rate than other companies incorporated in Ireland.
Ireland is being pressured by EU regulators because offering lower tax for only certain companies is a form of _state subsidy_ that results in _market distortion_.
Ikea, the Swedish company that is a pioneer in now-common aggressive profit shifting practices, is not being pursued by EU since it doesn't have a special deal with the Netherlands (where Ikea has a paper company that gets all of its profit shovelled into) where it gets to pay lower corporate tax than other companies incorporated in the Netherlands.
You got it the wrong way round. France, UK, et. al. just don't want the companies to not pay tax on the profits generated in the countries (at the per-country tax rate) by shifting said profits into other, lower-tax countries.
The issue isn't about lower tax rates, or moving to lower tax jurisdictions - these major companies don't pay anywhere near the relatively low Irish corporate tax rate of 12.5%.
It's about closing tax loopholes, which are separate from the tax rate. For example, Google paid just 2.4% tax a few years back, here's an excellent older article from Bloomberg on the subject:
Corporations sitting on multi-billion dollar cash piles, while many western governments are struggling with deficits isn't sustainable, so plugging these loopholes is likely to continue.
Actually, the governments are struggling with deficits because they spend more than they make.
I'm not claiming companies shouldn't pay the proper tax, but that 2.4% tax also includes donations, employing people (which also provide tax) and what not which they can write off.
What really needs to happen, is that governments stop spending more than they make. Sure they can increase taxes, but they will also try to increase spending (defeating the purpose).
>What really needs to happen, is that governments stop spending more than they make
And closing loopholes to increase revenue is one way to accomplish that. You can't state with certainty that governments will necessarily increase spending proportionally -- just look at "austerity" measures.
Governments don't necessarily get into trouble by spending more than they have. If they spend only on goods and services that tend to promote sustainable economic growth, the rise in future revenues will more than compensate for that.
If you borrow 1000 kg of seed corn and then plant it on fertile land, you can pay back that ton with interest. If you borrow 1000 kg of seed corn, distill it into whiskey, then drink some and burn the rest, you will probably have some trouble with debt later.
If governments spent only on those things that provided more value to their taxpayers than simply holding on to their cash, people would actually be clamoring to pay more in taxes. But the principal-agent problem usually makes that impossible. People that spend other people's money have little incentive to do it prudently.
I have to think all of this is just global political jostling -- you're seeing the same thing happen here in the US with tax inversion headlines. Issues like this poll well.
In the US, no politician wants to attempt true tax reform since it's basically a non-starter so instead we have a game of quick-wins. Yes, it makes the public feel good but doesn't actually help simplify the tax code to promote business and limit avoidance ROI.
By the time Ireland's new tax laws become enforceable (2020-ish), you'll see all of these companies re-evaluate their office locations within the tariff-free member states. Who knows, maybe the next Ireland will be in Liechtenstein, Turkey, San Marino, Monaco, or Andorra -- I think they are non-EU but participate in the single market.
The iterations of corporate tax avoidance are pretty fun to watch -- and even more interesting to try and understand. Can't wait to see what the lawyers cook up next:)
If the US simplified the tax system, congressmen would no longer be able to dole out industry and company-specific tax breaks as 'favors' to donors and supporters. These targeted tax breaks also serve to show that the elected representatives are 'taking action' to do things like 'create jobs' and 'reduce unemployment'.
Yes, they could. The particular method of simplification would, no doubt, be a handout to a favored constituency at the expense of others, and, in any case, the simplification wouldn't prevent future handouts in any way.
Dublin does have a pool of talent from the existing companies based there, so any effects will be trailing; they won't show up immediately.
My understanding is that a number of Europeans are not all that interested in relocating to Dublin. In the medium term, if the tax advantages are nullified, I think more international offices will end up opening in London or on the continent because it's easier to attract talent.
I wouldn't be surprised if this ends up hurting tech development in Ireland in the long term.
> I wouldn't be surprised if this ends up hurting tech development in Ireland in the long term.
I'm not sure there is much tech development to hurt.
"The talent pool here is much smaller than that of Silicon Valley. The single most important aspect of Silicon Valley is that it’s where many great people choose to live. Stripe’s employees come from Honduras, Kenya, India, Sweden, Canada, Austria, and more—but they’ve all chosen to live in Silicon Valley. Because Ireland has fewer of these immigrants, Irish start-ups are forced to either hire from a much more limited group, or to try to convince people to move here. (A third option is to have a geographically distributed team from the start; this route is also quite tough.)"
Anywhere is going to come across as inferior to Silicon Valley from that point of view, but that doesn't mean there isn't some tech development there to hurt.
How does the "double Irish" tax system compare to Asian countries that are basically starting to dominate the world again? How much tax does Samsung pay in South Korea as well as Chinese companies based in China?
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[ 3.3 ms ] story [ 108 ms ] thread(N.B. I'm ironically copying the language used to describe people who are might or might not be working but still depend on government programs for food, housing, etc)
That also levels the field a bit in that companies large enough to run departments that optimize for such loop holes have less of an advantage over the small fellows in the garage.
Market at work, and all that.
I have two friends from Ireland who work at a tech company who recently opened an office there. They love the work and say that it is easy for them and their friends to get jobs because of all the companies coming there. My company is thinking about opening a European office, and Ireland is under consideration. This move might slow or stop companies from coming to Ireland.
What's wrong with that?
Companies don't exist in a vacuum, as evident in that very few companies prefer to put their offices in the middle of the sea or deep the jungle. They benefit greatly from infrastructure of our society, and it's fair that they should pay their share to build and maintain it.
There are a lot of people who think that much (if not most) tax dollars go to waste, so they do not want to pay because they think that taxes are funding harms to their fellow citizens and foreigners. I am one of those people, and I do not want to be responsible for hurting my fellow man.
I wonder if you would be so principled if it cost you money rather than saved you money.
I use the roads which I (and all my fellow citizens) are forced to pay for, at least partly because the government has crowded out all the alternatives. With respect to firefighters, I would be very happy to return to the system where the insurance company provided fire-fighting services, as was the case before the government took over the industry.
I have often made the case against policies that greatly benefit me (financially and otherwise), but at an unacceptable cost to others, and I am sure that I am not alone in having done so.
Companies playing legal games around taxes is exactly the behavior that the complicated tax code incentivizes. Play games, get money. Are corporations not supposed to play? It's parallel to programming productivity measurements. If a company starts counting LOC and rewarding it, they are going to get precisely what they asked for: More lines of code.
Wrong is a subjective value, but yes, most people feel that it's wrong.
http://en.wikipedia.org/wiki/Double_Irish_arrangement
Immensely wealthy multinational corporations have a lot of money to spend on lawyers and accountants, so while these companies are probably not evading tax the avoidance schemes they come up with are sometimes not legal requiring them to repay.
Don't forget that tax is part of law and so there is what's written and how that's interpreted by the courts. Until you've had case law there are areas of uncertainty.
It's not a hard number but perceptions of fairness are certainly important in how democratic countries formulate tax law.
http://en.m.wikipedia.org/wiki/Taking_the_piss (first sentence: unreasonable).
Perhaps you'd prefer to use the term 'electorate'.
Regardless, the meaning was clear and your objection rather ridiculous.
At a global scale, there is only law. If countries want more taxes, they have to change their laws, and be prepared to deal with the unintended consequences of those changes.
Most businesses prioritize their own market value, and subordinate all other motives, including apparent political posture, towards maximizing that one metric. Therefore, they only pay taxes to avoid the negative effects of not paying taxes, rather than out of any perceived moral obligations.
The companies are there because the optimization process that involves jurisdiction shopping determined that establishing a business presence in Ireland provided greater benefits than the other options. There can be only one "best" jurisdiction for any given business entity. Complaining that someone else's seems to be better for more entities than yours is just sour grapes.
If you can't compete on a tax cost basis, there are other ways to attract business: a zero-corruption bureaucracy, privacy or secrecy for principals, reduced reporting requirements, reduced time from initial filing to practice, ironclad and proactive intellectual property protections, strong infrastructure, rock-solid stable units of accounting, or any of dozens of other points that may provide business value that more than compensates for the tax burden.
So fairness is a red herring. It is the objective value that is provided in proportion to the taxes taken that determines whether taxes are "too high" for a business to bear.
Seems to me that countries such as France, U.K., etc. are basically acting as robber barons.
Ireland is being pressured by EU regulators because offering lower tax for only certain companies is a form of _state subsidy_ that results in _market distortion_.
Ikea, the Swedish company that is a pioneer in now-common aggressive profit shifting practices, is not being pursued by EU since it doesn't have a special deal with the Netherlands (where Ikea has a paper company that gets all of its profit shovelled into) where it gets to pay lower corporate tax than other companies incorporated in the Netherlands.
It's about closing tax loopholes, which are separate from the tax rate. For example, Google paid just 2.4% tax a few years back, here's an excellent older article from Bloomberg on the subject:
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...
Corporations sitting on multi-billion dollar cash piles, while many western governments are struggling with deficits isn't sustainable, so plugging these loopholes is likely to continue.
I'm not claiming companies shouldn't pay the proper tax, but that 2.4% tax also includes donations, employing people (which also provide tax) and what not which they can write off.
What really needs to happen, is that governments stop spending more than they make. Sure they can increase taxes, but they will also try to increase spending (defeating the purpose).
And closing loopholes to increase revenue is one way to accomplish that. You can't state with certainty that governments will necessarily increase spending proportionally -- just look at "austerity" measures.
Governments don't necessarily get into trouble by spending more than they have. If they spend only on goods and services that tend to promote sustainable economic growth, the rise in future revenues will more than compensate for that.
If you borrow 1000 kg of seed corn and then plant it on fertile land, you can pay back that ton with interest. If you borrow 1000 kg of seed corn, distill it into whiskey, then drink some and burn the rest, you will probably have some trouble with debt later.
If governments spent only on those things that provided more value to their taxpayers than simply holding on to their cash, people would actually be clamoring to pay more in taxes. But the principal-agent problem usually makes that impossible. People that spend other people's money have little incentive to do it prudently.
In the US, no politician wants to attempt true tax reform since it's basically a non-starter so instead we have a game of quick-wins. Yes, it makes the public feel good but doesn't actually help simplify the tax code to promote business and limit avoidance ROI.
By the time Ireland's new tax laws become enforceable (2020-ish), you'll see all of these companies re-evaluate their office locations within the tariff-free member states. Who knows, maybe the next Ireland will be in Liechtenstein, Turkey, San Marino, Monaco, or Andorra -- I think they are non-EU but participate in the single market.
The iterations of corporate tax avoidance are pretty fun to watch -- and even more interesting to try and understand. Can't wait to see what the lawyers cook up next:)
My understanding is that a number of Europeans are not all that interested in relocating to Dublin. In the medium term, if the tax advantages are nullified, I think more international offices will end up opening in London or on the continent because it's easier to attract talent.
I wouldn't be surprised if this ends up hurting tech development in Ireland in the long term.
I'm not sure there is much tech development to hurt.
"The talent pool here is much smaller than that of Silicon Valley. The single most important aspect of Silicon Valley is that it’s where many great people choose to live. Stripe’s employees come from Honduras, Kenya, India, Sweden, Canada, Austria, and more—but they’ve all chosen to live in Silicon Valley. Because Ireland has fewer of these immigrants, Irish start-ups are forced to either hire from a much more limited group, or to try to convince people to move here. (A third option is to have a geographically distributed team from the start; this route is also quite tough.)"
source: (scroll down) http://patrickcollison.com/
https://news.ycombinator.com/item?id=8437030