

Dropbox to Establish International Office in Dublin - j_col
http://www.idaireland.com/news-media/press-releases/dropbox-to-establish-inte/index.xml

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BenjaminDyer
With the UK being the biggest userbase in the EU for Dropbox its a shame
they've decided to open up in Dublin, as my accountant would say its a good
"tax optimisation" strategy.

Sure, hate the game not the player, but they could have scored some major plus
points on the day Public Accounts Committee in the UK have poured scorn on
Google, Amazon and Starbucks:

<http://www.bbc.co.uk/news/business-20559791>

~~~
cemerick
I continue to have difficulty understanding the gnashing of teeth around
various "tax minimization" strategies, e.g. being "immoral" and all that.

Setting aside those companies that deal in 'hard goods' (e.g. Amazon-the-
store, Starbucks, etc), could someone explain the rationale of taxation w.r.t.
corporate domicile?

Say I offer a software-based service in the U.S. (i.e. all the servers,
billing, admin, dev, etc are done there), and by dint of luck/happenstance, a
majority of the userbase ends up being in the EU. I (or my ISP) or my
customers (or their ISP) are paying for the pipe between us (which is
presumably taxed however the relevant localities have chosen); beyond that, I
am not benefiting from any government services in the EU.

Should I nevertheless pay taxes in the EU (perhaps proportionately to each
member nation based on the mix of nationalities of my userbase)? When I set up
a European office, shall I be shamed into setting up HQ in whatever country
houses the majority of my customers that year? What happens when that mix
changes such that the majority of my customers are in a different nation?

All of this sounds absurd, but it sounds like the standard (or something
similar to it) being applied to Dropbox in this case.

~~~
Osmium
I think the argument is that if you're making a profit off a country's
citizens, you should also be paying taxes to that country's government,
otherwise there'll be a large net flux of money out of that country (e.g. with
Amazon, Starbucks in the UK).

Let me put it another way, you say that:

>beyond that, I am not benefiting from any government services in the EU.

but you are benefiting from the government. Without a stable and moderately
successful government, your customers wouldn't be in a position to be able to
pay for your services. And that's exactly why most of your customers could,
conceivably, come from the EU, but are unlikely to come from a developing
country.

I'm not saying I agree with this; I don't know enough about how this sort of
taxation affects the system as a whole, but I believe that's the logic.

~~~
wfaler
The rule generally applied, which I think is a sensible one, is that you pay
tax in a country on profits derived from it IF you have a permanent place of
establishment there (branch office, sales office, retail outlets etc). This
means a company that has no physical presence in a country but sells products
digitally there has no taxes due (except sales tax/VAT in the EU in some cases
if over a certain threshold).

The issue in the case of Amazon, Starbucks et all in the UK right now is that
these companies DO have a local permanent establishment, but manage to
minimize their corporate tax through a mechanism called "transfer pricing",
whereby they pay their sister branches in lower tax jurisdictions license fees
etc for using brand, IP, software systems etc, thus increasing their tax
deductible expenses in the high tax jurisdiction (UK).

What's useful to note is that none of this would be possible without double
taxation agreements and the EU, both which successive UK govts and tax
authorities have painstakingly and explicitly negotiated and agreed to. If
there are no double taxation treaties, taxes for cross-border payments would
in fact be quite punitive (withholding taxes etc).

It seems to me the UK govt thought they would benefit from these agreements
when they where originally negotiated, but it has not turned out to be the
case. The whole "moral outrage" is just the government passing the buck on a
ball they themselves dropped.

As a side note, I don't believe moral outrage is conducive to the rule of law.
These multinationals follow the letter of the law and have no further
obligations. If the government thinks otherwise, they should renegotiate their
positions and stop pointing fingers at others for a ball they dropped.

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EamonLeonard
Anyone dismissing[1] this as purely a tax-play[2] doesn't do service to the
thriving, vibrant and diversive tech community that Dublin has. Anyone based
here for even a few weeks would know that.

Dublin's #1 strength over places like London and Berlin is it's geographic
size, which makes meetups accessible, leaders and role models available, and
creates a friendly and familiar feel, where we all fee like we are part of
something bigger than the startups that are here.

Side note: To anyone here on HN visiting Dublin in the future, feel free to
connect with us, you'd be very welcome -- @ me on Twitter... @EamonLeonard

[1] [http://thenextweb.com/insider/2012/12/03/dropbox-
announces-f...](http://thenextweb.com/insider/2012/12/03/dropbox-announces-
first-international-office-in-ireland-to-offer-increased-support-more-
languages/)

[2] <https://news.ycombinator.com/item?id=4864190>

~~~
alexkus
Picking an EEC country is a good idea because (Other things aside from the
tax...):-

Talent pool. Higher unemployment at the current time.

It's also part of the Euro so a good base (rather than the UK) for collecting
payments from the Eurozone countries.

Native English speakers.

Easy for other European citizens to go work there (no visa issues).

Irish passport holders can enter the Green Card Lottery (you can't with just a
UK passport) so it could make relocation to the US easier for some.

------
znt
I thought UK had a richer talent pool, for development positions and such. I
really wonder if they chose Ireland to evade tax.

~~~
Deusdies
I don't see how establishing your company in a country with a lower tax rate
as opposed to some other country can be considered as tax "evasion".

~~~
alexkus
It's not, it's "tax avoidance" which is entirely legal but various Governments
(UK and France in particular) and starting to get upset about.

"Tax evasion" is not paying tax that you must pay. "Tax avoidance" is finding
ways to not be liable for the tax in the first place.

~~~
john_flintstone
It's not tax avoidance either. It would only be tax avoidance if they moved
from one EU country to another one that had a lower corporate tax rate. This
is their first European office - it makes perfect sense to choose the location
that brings the greatest benefits to the company.

~~~
chalst
Quite so. Richard Murphy put together a set of definitions that might be of
interest: [http://www.taxresearch.org.uk/Blog/2010/07/07/tax-
avoidance-...](http://www.taxresearch.org.uk/Blog/2010/07/07/tax-avoidance-
evasion-compliance-and-planning/)

> Tax avoidance is seeking to minimise a tax bill without deliberate deception
> (which would be tax evasion) but contrary to the spirit of the law. It
> therefore involves the exploitation of loopholes and gaps in tax and other
> legislation in ways not anticipated by the law. Those loopholes may be in
> domestic tax law alone, but they may also be between domestic tax law and
> company law or between domestic tax law and accounting regulations, for
> example. The process can also seek to exploit gaps that exist between
> domestic tax law and the law of other countries when undertaking
> international transactions.

(I'm a former tax accountant, at KPMG - these definitions are uncontroversial
AFAIK)

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jaimebuelta
Does anyone know what do they refer with "Iberian language"?
<https://www.dropbox.com/position?jvi=o92YWfwP,Job>

I mean, as they are referring before to Spanish, I guess it is Portuguese,
maybe?

Because if they refer to Old Iberian
(<http://en.wikipedia.org/wiki/Iberian_language>), it is going to be difficult
to find anyone :-D

~~~
appplemac
I guess they mean a language spoken on Ibearian Peninsula – Spanish and
Portugese as major ones and Catalan, Basque, Galician as regional ones in
Spain. No idea about Portugal's local languages.

~~~
jaimebuelta
I don't think so, I think is just errata ;-)

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abcd_f
From 5 hours ago - <https://news.ycombinator.com/item?id=4864190>

------
onetwothreefour
LOL.

