
Ireland to close corporate tax loophole used by Google and others - llamataboot
http://www.latimes.com/business/la-fi-ireland-tax-haven-20141015-story.html
======
mindcrime
This makes me sad on so many levels. One, because it's sad that the US
government has so much ability to force other sovereign entities to bend to
its will, and two, because paying more taxes to the US government is never a
good thing. I personally support anybody who finds new and creative ways to
avoid sending tax dollars to the USG... after all, not everybody wants to fund
the US's empire building overseas wars, torture camps, surveillance
infrastructure, propaganda machine, and massive money-wasting bureaucracy.

> As we've always said, it's for governments to decide the law and for
> companies to comply with it

That is so fatalistic and depressing. _Everybody_ should feel empowered to
work to shape what "the law" is. Personally, I want society's notion of "the
law" rolled back to just how Bastiat[1] defined it:

 _" What, then, is law? It is the collective organization of the individual
right to lawful defense. "_

I'm also reminded of what Bastiat said about lawful plunder and the perversion
of the law:

 _But, generally, the law is made by one man or one class of men. And since
law cannot operate without the sanction and support of a dominating force,
this force must be entrusted to those who make the laws._

 _This fact, combined with the fatal tendency that exists in the heart of man
to satisfy his wants with the least possible effort, explains the almost
universal perversion of the law. Thus it is easy to understand how law,
instead of checking injustice, becomes the invincible weapon of injustice. It
is easy to understand why the law is used by the legislator to destroy in
varying degrees among the rest of the people, their personal independence by
slavery, their liberty by oppression, and their property by plunder. This is
done for the benefit of the person who makes the law, and in proportion to the
power that he holds._

[1]: [http://bastiat.org/en/the_law.html](http://bastiat.org/en/the_law.html)

~~~
bogomipz
Do you realize that Google, Facebook, Oracle et al. are US companies? These
companies all benefited from the stable business climate that the US
government largely provides(stable judicial system, Delaware Companies, a
stable financial system, State University systems that provide research grants
that made Google possible in first place etc.) So why should these
Corporations that benefitted from that not pay their fare share of taxes? I
hate pay taxes too but I pay them and I understand that they pay for services
I benefit from. You sound both naive and uninformed. Its a farce that American
companies that make billions pay almost no tax on those profits while us
little people shoulder the burden. Did you actually read the article?

~~~
briandh
The "fair share" rhetoric so frequently deployed in these contexts would be
more convincing if US corporate tax policy was more in line with international
norms and if less tax revenue funded policies ranging from wasteful to
downright immoral.

~~~
Retric
'Normalizing' taxes with the rest of the world would be a massive taxes
increase on huge numbers of companies. We might have a high nominal rate, but
companies can often get vary low effective tax rates. Arguably, what we need
is a corporate AMT and a lower top tax bracket. Otherwise some companies focus
on paying zero taxes where others simply focus on being profitable.

~~~
briandh
It's not just the nominal rate.

The average effective corporate tax rate is also quite a bit higher for the US
than other developed countries; according to a report by
PricewaterhouseCoopers and the World Bank, 27.9% versus an OECD average of
15.9%. [1 citing 2] The right wing think-tank AEI reported a smaller disparity
of about 9% a few years earlier. [3] For what it's worth, these rates are
fairly variable over the years.

So "huge numbers" seems like quite a stretch.

Moreover, I used the broader term "policies" rather than "rates" for a reason.
The US's worldwide taxation scheme, for instance, is in itself problematic.

[1] [http://barbwire.com/2014/10/15/analysis-are-us-corporate-
tax...](http://barbwire.com/2014/10/15/analysis-are-us-corporate-taxes-really-
the-highest-in-the-world/)

[2]
[http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/...](http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Special-
Reports/Paying-Taxes-2014.pdf)

[3] [http://www.aei.org/article/economics/fiscal-
policy/taxes/rep...](http://www.aei.org/article/economics/fiscal-
policy/taxes/report-card-on-effective-corporate-tax-rates/)

~~~
Retric
After examining 288 corporations that where consistently profitable every year
for 5 years. On average they "paid an effective federal income tax rate of
just 19.4 percent." Which is close to the "15.9 percent" you linked.

However, "Twenty-six of the corporations, including Boeing, General Electric,
Priceline.com and Verizon, paid no federal income tax at all over the five
year period. A third of the corporations (93) paid an effective tax rate of
less than ten percent over that period."

The point is with such high variability in tax rate's companies spend a lot of
time looking for ways to avoid paying taxes vs. building better products etc.

PS: Yea, just like the articles you linked this is also biased but the numbers
are not made up.
[http://www.ctj.org/corporatetaxdodgers/sorrystateofcorptaxes...](http://www.ctj.org/corporatetaxdodgers/sorrystateofcorptaxes.pdf)

------
funkyy
I wonder what UK, Germany etc promised to Ireland in exchange. The tax debate
was strong since more than a decade and it was even stronger during the
default of Ireland.

All talks before have failed - I cant imagine what EU had to promise to them
to change their minds...

~~~
alphadevx
Ireland never defaulted.

~~~
Qzmp
Not only did Ireland not default but it was strongarmed by the ecb into
repaying loans foreign banks had made to irish banks. The reason for this was
to prevent 'contagion' ie to save the european banking system. Ireland was
later given some assurances about being looked after for doing this which have
so far not been backed up

------
Afforess
This is unfortunate. Corporate taxation is double taxation in the first place,
and silly. Corporate profits are already taxed (in the form of
dividends/capital gains to shareholders, and income tax to employees), there
is no reason to tax them twice. Further, Corporate taxes make up a pittance of
the total revenue by the federal US government. America wastes too much time
worrying over the relatively tiny amount of corporate tax dodging when it
spends trillions elsewhere.

America would be much better off without corporate taxes.

[http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against](http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against)

~~~
trhway
>Corporate profits are already taxed (in the form of dividends/capital gains
to shareholders, and income tax to employees)

employees' income - salaries - is expenses and thus excluded from profits, so
there is no double taxation here.

~~~
otterley
Under GAAP (standard accounting practices) any profits become a liability in
the form of shareholders' equity. When the shareholders sell, they're taxed on
the profits. So it's a reasonable argument that taxing the profits are a form
of double taxation.

~~~
killerpopiller
the minority of companies is shareholded in EU I think

~~~
TheCoelacanth
I believe that's true in the US as well because there are a huge number of
sole proprietorships and partnerships. However, the companies with
shareholders tend to be much larger companies, so they still make up a very
portion of the economy.

------
tehwebguy
> Starting Jan. 1, no companies will be allowed to set up a Double Irish
> scheme. Ireland also will phase it out through 2020 for companies that
> already have one, Noonan said.

I wonder if there will be a mad dash to set up corps in Ireland over the next
few months.

~~~
mey
5 years of tax loop holes may make it worth it.

------
garrettheaver
As someone who works in the tech sector in Ireland I personally think now is
the right time to be closing this particular loophole. It has run its useful
course. It has become a mechanism for huge profits to be shuffled around
virtually untaxed by organisations with a scale large enough to employ teams
simply to exploit it. It's not a realistic proposition for SMEs to manage the
level of international complexity it involves, particularly when you include
the Dutch sandwich. It's an unfair and unbalanced advantage to large
multinationals.

I disagree with others that companies should not have to pay corporation tax.
I don't believe it is double taxation. Corporation tax is not charged on
employee income, thats an operational expense and the tax on income is paid by
the employee relative to their own tax status. Also, tax on dividends is
effectively a personal income tax. Dividend tax is not liable on dividends
paid to other Irish resident companies, amongst many other sensible
exemptions. Corporation tax is charged on the trading profit of a corporate
entity, not its revenue. Also, it's worth pointing out that if a company has
paid corporation tax in previous years in Ireland and then reports a loss they
may be entitled to a refund.

A side note on FDI implications. Yes the "double Irish" has played a role but
it's by no means the only reason large multinationals locate here. The new
"Knowledge Box" structure in conjunction with our relatively low corporate tax
rate of 12.5%, the tax credits for Research and Development related
activities, our membership of the EU and Eurozone, the ability of companies to
deal directly with the highest levels of government, the fact we natively
speak English, the fact we're culturally similar to the US and UK, the fact we
have a timezone which overlaps for at least part of the day with almost
everywhere in the US and that we have a statistically young and educated
workforce all contribute to attracting tech companies here. Thats before we
even consider the efforts of the IDA (and Enterprise Ireland at a domestic
level) who IMHO are superb national assets.

I think that if we can restructure our tax rules so that "Ireland Inc" gains
even a fraction more revenue from the multinationals operating here whilst
retaining our international competitiveness, then it's unquestionably the
smart thing to do.

------
droopyEyelids
Sort of seems like they're pulling up the ladder to the benefit of established
companies and the detriment of newcomers.

~~~
Dylan16807
Phasing it out in 5 years seems pretty fast to me in governmental terms, how
is this pulling up the ladder?

------
circlefavshape
Just FYI - as far as I understand it, the "double Irish" works because in the
US you are tax-resident if you incorporate in the US, while in Ireland you are
tax-resident if you do business in Ireland

So if you incorporate in Ireland but do your business in the US you are tax-
resident nowhere, and naturally corporations exploit this

------
anonbanker
This is all just further fallout from Ireland's stance on the Lisbon treaty,
which led Intel, HP, and Microsoft to close up shop within a month of each
other.

I'm very glad the loophole is being closed, but I don't think Ireland's tech
sector will ever recover.

~~~
barrkel
This is news to me. Do you have references? Intel, MS and HP are all still
present.

HP has downsized in Ireland in the past, Galway in particular, but that's a
chain reaction from it being Digital, then Compaq. But they still have a
presence there too.

Dell left Ireland, but I don't recall any connection being made with the
Lisbon treaty vote at the time, and don't see much evidence in searches. I
think it was more down to newly-joined Poland being cheaper.

------
zurn
I wonder if the refusal of other EU states to help with the banking crisis had
something to do with Ireland's tax haven antics. Ireland got a worse deal than
the other EU crisis countries.

~~~
alphadevx
The ECB bailed out the Irish to save the European banking system, and
ultimately the Euro, that was exposed to Irish bad debt via loans made to
Irish banks by other European banks. The bailout was in the form of loans at a
punitive interest rate, even the IMF (also part of the bailout program),
seemed kind in comparison.

Ultimately the ECB eased up when it become clear that Ireland was doing a
sterling job of turning itself around, making heavy cuts and reforms in the
process, but the growing impression I have of the EU is that the rules are for
the little countries, when you look for example at the debt problems and
flouting of the European Fiscal Compact by Italy and France presently.

The lack of solidarity throughout this financial crisis has been telling, and
will leave lasting resentments (just ask your Greek, Irish, or Portuguese
friends).

~~~
zurn
Well, Ireland took a bad deal from the ECB, nationalizing the bank imposion
and imposing punishing austerity measures (executed with sterling enthusiasm
as you say) instead of doing something like Iceland.

It's more Ireland bailing out the ECB, courtesy of hapless and/or corrupt
political leadership.

Even the traditionally right-wing IMF turned around a while ago and has been
consistently calling out Europe's austerity enthusiasm as damaging. See eg.
[http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-
amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/)

Some in the austerity movement have since been parading Ireland as an example
of the success of their receipe for some reason. But:
[http://www.nytimes.com/2014/01/11/opinion/irelands-
rebound-i...](http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-is-
european-blarney.html)

~~~
alphadevx
I agree with you on the treatment of Ireland, and the subsequent criticism of
the country over corporate tax issues, often implying that the country was
implicit in this, was rubbing salt in the wounds. Those tax structures were in
place long before the crisis.

I'm torn on whether Iceland's approach was better however (for them), time
will tell.

~~~
innguest
You have to admit it was at least more fair, as Iceland punished those that
are really to blame (bankers) instead of the innocent (citizens).

Whether it was "better" or "worse" is a discussion I'll leave to the
consequentialists.

~~~
alphadevx
Think about what default means: someone lent you money, and you never gave it
back. Now think about that it terms of fairness.

Sure the bankers lent money and never got it back, but who gave the money to
the banks in the first place? Lots of private individuals were hurt:
[http://en.wikipedia.org/wiki/Icesave_dispute](http://en.wikipedia.org/wiki/Icesave_dispute)

No clear-cut good/bad guys in this mess, lots of moral hazard.

~~~
innguest
I'm confused.

If someone lends me counterfeit money, I don't have to give it back.

Banks don't lend real money, they act with the government to legally leverage
their deposits and lend out leveraged money. This money is created in the
books and did not come from production in the real economy.

If private individuals' deposits were hurt then all the more reason to arrest
the bankers.

The moral hazard comes from government guarantees like FDIC that discourage
banks from investing prudently.

