7 ms·

Good. I don't understand why companies need to be bribed to come to markets. Want to sell your goods, great, pay the same taxes every other company pays. This i

by jedrek 11y ago

Good. I don't understand why companies need to be bribed to come to markets. Want to sell your goods, great, pay the same taxes every other company pays. This is nothing more than government subsidies for specific private companies.

ZeroGravitas 11y ago
It might actually be a good thing for the taxpayers of that country when looked at narrowly, which is often why these deals are done, but if every EU nation does it to their neighbour then overall it's a classic case of "race to the bottom" and taxpayers all across the EU will lose out.
- pjmlp 11y ago
  Specially when companies play the game "trick the government", like e.g. Nokia. They moved their plant from Germany to Romania, got the "Company of the Year" award from the Romanian government and about two years later moved the factory again to an Asian country. In the process they got two angry governments and now they are as they are.
  - ptaipale 11y ago
    They didn't really "move" plants around; they were expanding production on different markets to meet needs on these countries and continents, and also withdrawing manufacturing in some places (the big mistake in Germany, I understand, was the purchase and attempted conversion of an old television factory in Bochum). While I don't fully understand the case with the Romanian plant and why it was shut down so soon, what Nokia is now has little to do with their plant management strategy (except that I think it was efficient as long as plants were needed) and everything to do with senior management's product decisions (not production management). (FWIW, Nokia is currently a profitable company, just not in the phone terminal business.)
    - deleted 11y ago
      [deleted]
    - TeMPOraL 11y ago
      > They didn't really "move" plants around; they were expanding production on different markets to meet needs on these countries and continents, and also withdrawing manufacturing in some places Ah, the tactical decisions. "We're not retreating, we're just advancing in a different direction."
      - ptaipale 11y ago
        Indeed. For another example, the trade union of horse carriage drivers for People's Co-Op Stores in Finland (Elanto) is still on strike (which started in 1930 and never ended). They just moved on to advance in a different direction (i.e. started driving lorries, and the union eventually merged/became part of the local "teamsters" union).
  - distances 11y ago
    There were no angry governments, that is just your sour grapes about the globalization. Finland lost production to Germany, Germany to Romania, and Romania to Asia, and blaming a single company is quite naive. Nokia's downfall was due to software issues, and certainly had nothing to do with improved efficiency thanks to production optimization.
    - pjmlp 11y ago
      Which just proves you are not located in NRW German state nor in Romania.
  - lucio 11y ago
    So companies should be forced at gunpoint to produce on a specific country?
    - furyg3 11y ago
      I think the Swedish and Romanian taxpayers were held at gunpoint in this scenario
      - lucio 11y ago
        By their own governments I assume. If you want to do an experimental check: just try to not pay taxes for a while, and you'll find yourself at the wrong end of a govt. gun eventually.
        TeMPOraL 11y ago
        > By their own governments I assume. Which itself was held at gunpoint by Moloch[0]. That's how it works - everyone has to play and lose because those who don't play lose first to those who do. [0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
- AnthonyMouse 11y ago
  > It might actually be a good thing for the taxpayers of that country when looked at narrowly, which is often why these deals are done, but if every EU nation does it to their neighbour then overall it's a classic case of "race to the bottom" and taxpayers all across the EU will lose out. The problem is that countries refusing to compete with each other doesn't actually help all of them. Countries like Germany have strong infrastructure, high availability of qualified labor, etc. If Romania had the same taxes as Germany then who would expand into Romania? And of course taking taxes off the table would just shift the issue to spending. If you required countries to have a uniform (presumably high) tax rate then they could just spend the money on things that encourage companies to expand there and you're right back to the same situation. Countries compete with each other to attract capital. The only way to stop that is to prevent the movement of capital across national borders, which is a completely unrealistic bad idea.
  - VSerge 11y ago
    To answer your question, everyone interested in paying much lower salaries to their workforce may decide to locate a factory in Romania. Market size, cost of operation, infrastructure, neighboring markets, and many more factors play an important role in such decisions. Taxes are far from being the most meaningful factor, and governments dumb enough to offer such deals are acting disgracefully towards both their tax-paying citizenry and their EU partners who don't engage in this race to the bottom.
    - AnthonyMouse 11y ago
      > To answer your question, everyone interested in paying much lower salaries to their workforce may decide to locate a factory in Romania. Market size, cost of operation, infrastructure, neighboring markets, and many more factors play an important role in such decisions. Of course there are many factors that go into it. What matters is how the country stacks up on balance. Countries that stack up unfavorably have no financial capacity to address their shortcomings because you can't build infrastructure or education with no money and governments can't collect money with no tax base. What they can do is lower taxes to attract investment so they can get 5% of something instead of 30% of nothing. Their primary alternative for attracting investment is to abandon safety and environmental regulations, which is not better.
- commandar 11y ago
  An example I can think of offhand is AMD (now Global Foundaries) choosing to locate one of their new fabs in Dresden after being offered lucrative tax benefits by the German government. AMD got to save money on the fab, Germany got long term economic investment in the former east. It was pretty much a win-win deal.
sjehay 11y ago
Incentives are generally designed to attract inward investment and job creation, rather than to persuade companies to sell into the market (i.e. please set up your factory/European HQ here, regardless of where you're actually going to sell most of your goods)
- ptaipale 11y ago
  Why should factory or headquarters be where the goods are sold? The whole point of EU is free movement of capital, goods and manpower. Farms are where there is fields, sun and irrigation; factories are where there is raw material, logistics and energy; headquarter functions are where there is capability to handle legal and financial questions. Goods and services are sold where there is customers. This is the very point of EU, so if we don't want that to happen, isn't the most logical step to disband EU immediately?
  - TeMPOraL 11y ago
    The EU is in the strange semi-state - in some ways united, in others still a set of separate nations. This ain't different than the states in the US - they compete for private investments too.
  - pjc50 11y ago
    "free movement of capital, goods and manpower": but not taxation. There's no real counterbalancing mechanism to the downsides of such movement. The EU can't work without US-style federalism and the erasure of national identities. So yes, it probably should be disbanded. Edit: or at least abolish Luxembourg, which is a stupid statelet left over from the treaty of Utrecht: http://ftalphaville.ft.com/2015/10/21/2142483/the-case-against-luxembourg/ http://ftalphaville.ft.com/2015/10/21/2142483/the-case-again...
    - icebraining 11y ago
      "US-style federalism"? The politics and $1B+ in tax breaks and perks paid by Nevada to get the Gigafactory say otherwise.
Shivetya 11y ago
I have no problem if an area is trying to land a major contributor to the area in jobs and future revenues. Giving tax breaks to get such tend to pay back in that you get support businesses cropping up to support the original beneficiary. These deals however just don't appear to provide any benefit to the areas affected, only to the companies. Is there a big pool of political contributions in countries like these? Do they have the equivalent of PACs and such?
- the-dude 11y ago
  Starbucks has a roastery in The Netherlands, so that means jobs at least.
  - gizi 11y ago
    Modern business only hires profiles that are in short supply already. So, they went to The Netherlands to exacerbate the shortages of skilled labour while doing nothing for the insufficiently skilled unemployed ones. "Jobs" are never a valid motivation to do anything, because the ones who don't have them, will never have them.
    - xixi77 11y ago
      Does coffee roasting really require that high-skill labor?
  - s73v3r 11y ago
    How many jobs? If you were to divide the amount of the tax break by the number of jobs, how much would the government have ended up paying per job?
- IkmoIkmo 11y ago
  > I have no problem if an area is trying to land a major contributor to the area in jobs and future revenues. Giving tax breaks to get such tend to pay back in that you get support businesses cropping up to support the original beneficiary. That's not really the issue. The issue is that these were tax deals done behind closed doors between government and businesses rather than the government creating a tax policy for all that is transparent and applied uniformly and fairly to all businesses, they created a tax policy for all except a handful of companies that could get private deals. And that usually leads to bad results after a while. Yes it makes sense to have tax policy that treats different businesses differently. And it makes sense for there to be some flexibility and to be able to negotiate on certain things in a transparent and fair manner (e.g. a business 'negotiating' over whether it applies for a sustainable energy tax benefit if it invests in a new green energy tech that happened to fall outside of the parameters of the sustainable energy programme the government created a few years ago when said tech didn't exist, there's some flexibility there to expand the programme for that particular company that makes sense. Such a negotiation fits with the aim of the tax programme, is transparent and will affect everyone equally who applies for it afterwards). But simply negotiating some special tax rate just for you that doesn't apply to anyone else, in a backroom deal that isn't officially known to anyone else, that's shady and corrupt, the kind of practices you expect from poor countries struggling with institutional development. How you actually spend the money (e.g. to improve the area affected) is another topic altogether. But in its first principle these tax deals made no sense.
ryanlol 11y ago
How the hell is corporate tax relevant to companies coming to markets and selling their goods? You're probably thinking of VAT.

by jedrek 11y ago

ZeroGravitas 11y ago

It might actually be a good thing for the taxpayers of that country when looked at narrowly, which is often why these deals are done, but if every EU nation does it to their neighbour then overall it's a classic case of "race to the bottom" and taxpayers all across the EU will lose out.

pjmlp 11y ago
Specially when companies play the game "trick the government", like e.g. Nokia. They moved their plant from Germany to Romania, got the "Company of the Year" award from the Romanian government and about two years later moved the factory again to an Asian country. In the process they got two angry governments and now they are as they are.
- ptaipale 11y ago
  They didn't really "move" plants around; they were expanding production on different markets to meet needs on these countries and continents, and also withdrawing manufacturing in some places (the big mistake in Germany, I understand, was the purchase and attempted conversion of an old television factory in Bochum). While I don't fully understand the case with the Romanian plant and why it was shut down so soon, what Nokia is now has little to do with their plant management strategy (except that I think it was efficient as long as plants were needed) and everything to do with senior management's product decisions (not production management). (FWIW, Nokia is currently a profitable company, just not in the phone terminal business.)
  - deleted 11y ago
    [deleted]
  - TeMPOraL 11y ago
    > They didn't really "move" plants around; they were expanding production on different markets to meet needs on these countries and continents, and also withdrawing manufacturing in some places Ah, the tactical decisions. "We're not retreating, we're just advancing in a different direction."
    - ptaipale 11y ago
      Indeed. For another example, the trade union of horse carriage drivers for People's Co-Op Stores in Finland (Elanto) is still on strike (which started in 1930 and never ended). They just moved on to advance in a different direction (i.e. started driving lorries, and the union eventually merged/became part of the local "teamsters" union).
- distances 11y ago
  There were no angry governments, that is just your sour grapes about the globalization. Finland lost production to Germany, Germany to Romania, and Romania to Asia, and blaming a single company is quite naive. Nokia's downfall was due to software issues, and certainly had nothing to do with improved efficiency thanks to production optimization.
  - pjmlp 11y ago
    Which just proves you are not located in NRW German state nor in Romania.
- lucio 11y ago
  So companies should be forced at gunpoint to produce on a specific country?
  - furyg3 11y ago
    I think the Swedish and Romanian taxpayers were held at gunpoint in this scenario
    - lucio 11y ago
      By their own governments I assume. If you want to do an experimental check: just try to not pay taxes for a while, and you'll find yourself at the wrong end of a govt. gun eventually.
      - TeMPOraL 11y ago
        > By their own governments I assume. Which itself was held at gunpoint by Moloch[0]. That's how it works - everyone has to play and lose because those who don't play lose first to those who do. [0] - http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
AnthonyMouse 11y ago
> It might actually be a good thing for the taxpayers of that country when looked at narrowly, which is often why these deals are done, but if every EU nation does it to their neighbour then overall it's a classic case of "race to the bottom" and taxpayers all across the EU will lose out. The problem is that countries refusing to compete with each other doesn't actually help all of them. Countries like Germany have strong infrastructure, high availability of qualified labor, etc. If Romania had the same taxes as Germany then who would expand into Romania? And of course taking taxes off the table would just shift the issue to spending. If you required countries to have a uniform (presumably high) tax rate then they could just spend the money on things that encourage companies to expand there and you're right back to the same situation. Countries compete with each other to attract capital. The only way to stop that is to prevent the movement of capital across national borders, which is a completely unrealistic bad idea.
- VSerge 11y ago
  To answer your question, everyone interested in paying much lower salaries to their workforce may decide to locate a factory in Romania. Market size, cost of operation, infrastructure, neighboring markets, and many more factors play an important role in such decisions. Taxes are far from being the most meaningful factor, and governments dumb enough to offer such deals are acting disgracefully towards both their tax-paying citizenry and their EU partners who don't engage in this race to the bottom.
  - AnthonyMouse 11y ago
    > To answer your question, everyone interested in paying much lower salaries to their workforce may decide to locate a factory in Romania. Market size, cost of operation, infrastructure, neighboring markets, and many more factors play an important role in such decisions. Of course there are many factors that go into it. What matters is how the country stacks up on balance. Countries that stack up unfavorably have no financial capacity to address their shortcomings because you can't build infrastructure or education with no money and governments can't collect money with no tax base. What they can do is lower taxes to attract investment so they can get 5% of something instead of 30% of nothing. Their primary alternative for attracting investment is to abandon safety and environmental regulations, which is not better.
commandar 11y ago
An example I can think of offhand is AMD (now Global Foundaries) choosing to locate one of their new fabs in Dresden after being offered lucrative tax benefits by the German government. AMD got to save money on the fab, Germany got long term economic investment in the former east. It was pretty much a win-win deal.

sjehay 11y ago

Incentives are generally designed to attract inward investment and job creation, rather than to persuade companies to sell into the market (i.e. please set up your factory/European HQ here, regardless of where you're actually going to sell most of your goods)

ptaipale 11y ago
Why should factory or headquarters be where the goods are sold? The whole point of EU is free movement of capital, goods and manpower. Farms are where there is fields, sun and irrigation; factories are where there is raw material, logistics and energy; headquarter functions are where there is capability to handle legal and financial questions. Goods and services are sold where there is customers. This is the very point of EU, so if we don't want that to happen, isn't the most logical step to disband EU immediately?
- TeMPOraL 11y ago
  The EU is in the strange semi-state - in some ways united, in others still a set of separate nations. This ain't different than the states in the US - they compete for private investments too.
- pjc50 11y ago
  "free movement of capital, goods and manpower": but not taxation. There's no real counterbalancing mechanism to the downsides of such movement. The EU can't work without US-style federalism and the erasure of national identities. So yes, it probably should be disbanded. Edit: or at least abolish Luxembourg, which is a stupid statelet left over from the treaty of Utrecht: http://ftalphaville.ft.com/2015/10/21/2142483/the-case-against-luxembourg/ http://ftalphaville.ft.com/2015/10/21/2142483/the-case-again...
  - icebraining 11y ago
    "US-style federalism"? The politics and $1B+ in tax breaks and perks paid by Nevada to get the Gigafactory say otherwise.

Shivetya 11y ago

I have no problem if an area is trying to land a major contributor to the area in jobs and future revenues. Giving tax breaks to get such tend to pay back in that you get support businesses cropping up to support the original beneficiary. These deals however just don't appear to provide any benefit to the areas affected, only to the companies. Is there a big pool of political contributions in countries like these? Do they have the equivalent of PACs and such?

the-dude 11y ago
Starbucks has a roastery in The Netherlands, so that means jobs at least.
- gizi 11y ago
  Modern business only hires profiles that are in short supply already. So, they went to The Netherlands to exacerbate the shortages of skilled labour while doing nothing for the insufficiently skilled unemployed ones. "Jobs" are never a valid motivation to do anything, because the ones who don't have them, will never have them.
  - xixi77 11y ago
    Does coffee roasting really require that high-skill labor?
- s73v3r 11y ago
  How many jobs? If you were to divide the amount of the tax break by the number of jobs, how much would the government have ended up paying per job?
IkmoIkmo 11y ago
> I have no problem if an area is trying to land a major contributor to the area in jobs and future revenues. Giving tax breaks to get such tend to pay back in that you get support businesses cropping up to support the original beneficiary. That's not really the issue. The issue is that these were tax deals done behind closed doors between government and businesses rather than the government creating a tax policy for all that is transparent and applied uniformly and fairly to all businesses, they created a tax policy for all except a handful of companies that could get private deals. And that usually leads to bad results after a while. Yes it makes sense to have tax policy that treats different businesses differently. And it makes sense for there to be some flexibility and to be able to negotiate on certain things in a transparent and fair manner (e.g. a business 'negotiating' over whether it applies for a sustainable energy tax benefit if it invests in a new green energy tech that happened to fall outside of the parameters of the sustainable energy programme the government created a few years ago when said tech didn't exist, there's some flexibility there to expand the programme for that particular company that makes sense. Such a negotiation fits with the aim of the tax programme, is transparent and will affect everyone equally who applies for it afterwards). But simply negotiating some special tax rate just for you that doesn't apply to anyone else, in a backroom deal that isn't officially known to anyone else, that's shady and corrupt, the kind of practices you expect from poor countries struggling with institutional development. How you actually spend the money (e.g. to improve the area affected) is another topic altogether. But in its first principle these tax deals made no sense.

ryanlol 11y ago

How the hell is corporate tax relevant to companies coming to markets and selling their goods? You're probably thinking of VAT.