4 ms·

When the people complain about the European union taking too much autonomy, this seems like a pretty good example. It seems crazy to me that Ireland is "not al

by dilap 9y ago

When the people complain about the European union taking too much autonomy, this seems like a pretty good example. It seems crazy to me that Ireland is "not allowed" to set taxes as low as it would like to attract foreign investment. Even states in the US can freely do that!

avar 9y ago
I don't like some EU taxation rules, e.g. the minimum 15% VAT, which effectively sets an upper bound on government efficiency, but this has nothing to do with that. Ireland is not being penalized for having taxes that are too low, but, in the words of the EC[1]: > Ireland granted undue tax benefits of up to > €13 billion to Apple. This is illegal under > EU state aid rules, because it allowed Apple > to pay substantially less tax than other > businesses. Ireland must now recover the > illegal aid. You can elect to have low taxes in the EU, but it's anti-competitive behavior for a government in the EU to give preferential treatment to some companies over others. Ireland is perfectly within their rights to have Apple pay the same taxes they've been paying already going forward. But to do so they need to adjust the general corporate tax rate, not just give Apple specifically those illegal benefits. 1. http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm
- dilap 9y ago
  Ah, I didn't pick up on that distinction. Thank you.
- eitally 9y ago
  It's interesting that this is true, because (at the state level, not federal) this is table stakes to lure large corporations to locate in one state over another. Just look at some of the pitches cities/states have been making to Amazon for their HQ2, or the Foxconn deal in Wisconsin. https://www.jsonline.com/story/news/politics/2018/02/05/foxconn-package-cost-wisconsin-eight-times-much-per-job-similar-2017-state-jobs-deals/1080214001/ https://www.jsonline.com/story/news/politics/2018/02/05/foxc...
  - throwaway2048 9y ago
    This is very negative behaviour in sum, because it becomes a race to the bottom where you either forgo all tax revenue, or you dont attract large companies. Its good the EU has rules in place to prevent this destructive behaviour.
    - AnthonyMouse 9y ago
      > This is very negative behaviour in sum, because it becomes a race to the bottom where you either forgo all tax revenue, or you dont attract large companies. It's not just that. The race to the bottom isn't really a thing because companies cost states money. They require the state to increase the resources they spend on transit capacity and emergency services etc. The only reason states want companies is because the amount of taxes they pay exceeds the amount of expenditures they require. So there is no race to have zero taxes, the competition is only to tax companies no more than the amount of government services they consume. Which isn't especially problematic. The real problem is that if states make special rules for large companies, it gives them an advantage over smaller companies, which destroys local businesses in favor of international ones. Then next year some other place gives the huge company a better deal and the city is devastated because the company displaced a huge chunk of the local economy and now they're leaving and taking it with them. If states want to compete by having low taxes, great. But nobody should be getting special treatment like that.
    - macspoofing 9y ago
      I don't see the negative outcome. Cities know the economic activity of 50,000 highly paid workers makes up for the loss of some property tax revenue. The alternative is no highly paid jobs and no property tax revenue (as the land is undeveloped).
      - Oletros 9y ago
        Then give the same opportunities to all the companies not only to some
yoz-y 9y ago
Can they? I do not know the taxation law in the US but isn't there any federal tax on top of state ones? In EU there is no "European corporate tax".
woadwarrior01 9y ago
States in the US cannot set the federal income tax rate. And there’s no real analogue of that in Europe. And if companies operating out of Ireland don’t pay their taxes, countries in the EU cannot selectively tax goods and services originating from Ireland; this runs counter to the ideals of free trade amongst the member nations of the EU.
greendesk 9y ago
I believe tax competition between states reaches problematic levels in the States. While individual rights are preserved, a race-to-the-bottom between states reaches a negative outcome for individual states; and for United states as a whole. Setting aggressive tax breaks to lure companies for a short period of time guides companies to jump state over state, with less revenue to each state. The aggressive tax breaks might better be revised in the States. Furthermore, was it that the Irish tax break to Apple was below that permissible by Irish law itself?
belorn 9y ago
They can, as long as all companies inside Ireland can enjoy the same low tax. The idea from the EU taxation rules is that all companies should be able to compete under same rules and that is not possible when a country give special taxation privileges for a single company. The reason why Ireland do not do this is that they would go bankrupt. Their budget relies on the fact that all the other companies in Irland pay the normal tax.
opportune 9y ago
When you allow "competition" between countries regarding who gets to set the lowest taxes, you end up a in a situation where there is a race to the bottom resulting in outsized benefits for a few countries. If you enforce collective bargaining you prevent that situation, and everybody does better overall.
nyandaber 9y ago
The problem here isn't Ireland being a tax haven, it's Ireland giving a preferential treatment to Apple, allowing them to pay less taxes than other companies in Ireland would pay in the same situation.
rsynnott 9y ago
The issue isn't that Ireland set taxes too low, but that it was allegedly secretly offering custom deals to certain companies. Ireland allegedly used to do this quite a bit back in the day.
IAmEveryone 9y ago
Your scenario isn't exactly what's happening here. But still, regarding your idea: why not? The Amazon HQ2 campaign is a pretty good example how companies are using tax competition to instigate a race-to-the-bottom. There's no doubt that Amazon would house these employees somewhere. So the payoff is essentially zero-sum. All that's changing is that Amazon is playing different populations against each other to save on tax. Rules against such behaviour are just an effective method to avoid a prisoners' dilemma by the most obvious method known to anyone playing the game: communication, and binding agreement. Now there is an argument that some locales may need to use tax policy if they are behind in every other feature, i. e. education, infrastructure etc. But in fact the EU is a rather successful model of flexibility in that regard: Just look at the incredible economic success of eastern Europe and the Balkans after the end of the cold war, or Portugal, or even Ireland itself. Just compare Belarus to its EU neighbours to get a sense of what's possible. How did this work? The EU does allow for tax incentives or subsidies where regions need to catch up. They also created an enormous system of direct transfers to allow investments into the factors that make regions competitive, such as infrastructure or rule-of-law. As a matter of fact, Ireland simply agreed to the rules, and their scope isn't a matter of any "natural law". If countries agree to conduct themselves by certain rules than that's that. Of course every single rule may occasionally diverge from what any single country would otherwise do, or the rule wouldn't be necessary. But, just as with any intentional law, these rules taken as a whole have empirically been extremely beneficial to its signatories.
- dilap 9y ago
  (You're right, I didn't take in the full subtlety of the Ireland EU situation. The specific EU rule seems much more defensible than my idea.) But regarding that idea: You make some interesting arguments in favor of states essentially forming a "cartel" in order to avoid driving taxes too low. But then how do you decide what "too low" is? Who gets to decide what a reasonable tax rate is? If we're a bunch of people in lonely Isolated State and we vote to set our tax rates very low, does it seem reasonable that some central government strongly controlled by more populated states can say, "no, that's not fair"? On an emotional level, I'm very sympathetic to the idea that the group of people deciding policy in a region should not be too far removed from that region. (Of course, that it still might actually result in globally worse outcomes. But it might actually be worth it, just to avoid the unjust feeling of "policy dictated by people far away".) Even then, I'm not convinced it actually results in worse outcomes. California has very high taxes, and is nevertheless a very popular destination. Some sort of centralized system that required all states to have CA levels of taxation seems like it would almost certainly be worse overall... (I'm more thinking out loud than trying to make an argument.)
hhw 9y ago
In a world where more and more power is concentrated into fewer and fewer large corporations, I'm not so sure this is crazy that they're not allowed to do this, nor that it would be a good thing if they were. The natural result would be that different states or nations race to the bottom chasing the corporations to locate there, depriving their citizens of substantial tax revenues that could have been used for the public good. Even if you're against social programs, there is still common infrastructure that everyone benefits from such as roads that need to be paid for.
namlem 9y ago
Yeah, but when states do it in the US it ends up as a race to the bottom. The losers are all the states that participated and the winners are big corporations and their shareholders.

by dilap 9y ago

avar 9y ago

I don't like some EU taxation rules, e.g. the minimum 15% VAT, which effectively sets an upper bound on government efficiency, but this has nothing to do with that. Ireland is not being penalized for having taxes that are too low, but, in the words of the EC[1]: > Ireland granted undue tax benefits of up to > €13 billion to Apple. This is illegal under > EU state aid rules, because it allowed Apple > to pay substantially less tax than other > businesses. Ireland must now recover the > illegal aid. You can elect to have low taxes in the EU, but it's anti-competitive behavior for a government in the EU to give preferential treatment to some companies over others. Ireland is perfectly within their rights to have Apple pay the same taxes they've been paying already going forward. But to do so they need to adjust the general corporate tax rate, not just give Apple specifically those illegal benefits. 1. http://europa.eu/rapid/press-release_IP-16-2923_en.htm http://europa.eu/rapid/press-release_IP-16-2923_en.htm

dilap 9y ago
Ah, I didn't pick up on that distinction. Thank you.
eitally 9y ago
It's interesting that this is true, because (at the state level, not federal) this is table stakes to lure large corporations to locate in one state over another. Just look at some of the pitches cities/states have been making to Amazon for their HQ2, or the Foxconn deal in Wisconsin. https://www.jsonline.com/story/news/politics/2018/02/05/foxconn-package-cost-wisconsin-eight-times-much-per-job-similar-2017-state-jobs-deals/1080214001/ https://www.jsonline.com/story/news/politics/2018/02/05/foxc...
- throwaway2048 9y ago
  This is very negative behaviour in sum, because it becomes a race to the bottom where you either forgo all tax revenue, or you dont attract large companies. Its good the EU has rules in place to prevent this destructive behaviour.
  - AnthonyMouse 9y ago
    > This is very negative behaviour in sum, because it becomes a race to the bottom where you either forgo all tax revenue, or you dont attract large companies. It's not just that. The race to the bottom isn't really a thing because companies cost states money. They require the state to increase the resources they spend on transit capacity and emergency services etc. The only reason states want companies is because the amount of taxes they pay exceeds the amount of expenditures they require. So there is no race to have zero taxes, the competition is only to tax companies no more than the amount of government services they consume. Which isn't especially problematic. The real problem is that if states make special rules for large companies, it gives them an advantage over smaller companies, which destroys local businesses in favor of international ones. Then next year some other place gives the huge company a better deal and the city is devastated because the company displaced a huge chunk of the local economy and now they're leaving and taking it with them. If states want to compete by having low taxes, great. But nobody should be getting special treatment like that.
  - macspoofing 9y ago
    I don't see the negative outcome. Cities know the economic activity of 50,000 highly paid workers makes up for the loss of some property tax revenue. The alternative is no highly paid jobs and no property tax revenue (as the land is undeveloped).
    - Oletros 9y ago
      Then give the same opportunities to all the companies not only to some

yoz-y 9y ago

Can they? I do not know the taxation law in the US but isn't there any federal tax on top of state ones? In EU there is no "European corporate tax".

woadwarrior01 9y ago

States in the US cannot set the federal income tax rate. And there’s no real analogue of that in Europe. And if companies operating out of Ireland don’t pay their taxes, countries in the EU cannot selectively tax goods and services originating from Ireland; this runs counter to the ideals of free trade amongst the member nations of the EU.

greendesk 9y ago

I believe tax competition between states reaches problematic levels in the States. While individual rights are preserved, a race-to-the-bottom between states reaches a negative outcome for individual states; and for United states as a whole. Setting aggressive tax breaks to lure companies for a short period of time guides companies to jump state over state, with less revenue to each state. The aggressive tax breaks might better be revised in the States. Furthermore, was it that the Irish tax break to Apple was below that permissible by Irish law itself?

belorn 9y ago

They can, as long as all companies inside Ireland can enjoy the same low tax. The idea from the EU taxation rules is that all companies should be able to compete under same rules and that is not possible when a country give special taxation privileges for a single company. The reason why Ireland do not do this is that they would go bankrupt. Their budget relies on the fact that all the other companies in Irland pay the normal tax.

opportune 9y ago

When you allow "competition" between countries regarding who gets to set the lowest taxes, you end up a in a situation where there is a race to the bottom resulting in outsized benefits for a few countries. If you enforce collective bargaining you prevent that situation, and everybody does better overall.

nyandaber 9y ago

The problem here isn't Ireland being a tax haven, it's Ireland giving a preferential treatment to Apple, allowing them to pay less taxes than other companies in Ireland would pay in the same situation.

rsynnott 9y ago

The issue isn't that Ireland set taxes too low, but that it was allegedly secretly offering custom deals to certain companies. Ireland allegedly used to do this quite a bit back in the day.

IAmEveryone 9y ago

Your scenario isn't exactly what's happening here. But still, regarding your idea: why not? The Amazon HQ2 campaign is a pretty good example how companies are using tax competition to instigate a race-to-the-bottom. There's no doubt that Amazon would house these employees somewhere. So the payoff is essentially zero-sum. All that's changing is that Amazon is playing different populations against each other to save on tax. Rules against such behaviour are just an effective method to avoid a prisoners' dilemma by the most obvious method known to anyone playing the game: communication, and binding agreement. Now there is an argument that some locales may need to use tax policy if they are behind in every other feature, i. e. education, infrastructure etc. But in fact the EU is a rather successful model of flexibility in that regard: Just look at the incredible economic success of eastern Europe and the Balkans after the end of the cold war, or Portugal, or even Ireland itself. Just compare Belarus to its EU neighbours to get a sense of what's possible. How did this work? The EU does allow for tax incentives or subsidies where regions need to catch up. They also created an enormous system of direct transfers to allow investments into the factors that make regions competitive, such as infrastructure or rule-of-law. As a matter of fact, Ireland simply agreed to the rules, and their scope isn't a matter of any "natural law". If countries agree to conduct themselves by certain rules than that's that. Of course every single rule may occasionally diverge from what any single country would otherwise do, or the rule wouldn't be necessary. But, just as with any intentional law, these rules taken as a whole have empirically been extremely beneficial to its signatories.

dilap 9y ago
(You're right, I didn't take in the full subtlety of the Ireland EU situation. The specific EU rule seems much more defensible than my idea.) But regarding that idea: You make some interesting arguments in favor of states essentially forming a "cartel" in order to avoid driving taxes too low. But then how do you decide what "too low" is? Who gets to decide what a reasonable tax rate is? If we're a bunch of people in lonely Isolated State and we vote to set our tax rates very low, does it seem reasonable that some central government strongly controlled by more populated states can say, "no, that's not fair"? On an emotional level, I'm very sympathetic to the idea that the group of people deciding policy in a region should not be too far removed from that region. (Of course, that it still might actually result in globally worse outcomes. But it might actually be worth it, just to avoid the unjust feeling of "policy dictated by people far away".) Even then, I'm not convinced it actually results in worse outcomes. California has very high taxes, and is nevertheless a very popular destination. Some sort of centralized system that required all states to have CA levels of taxation seems like it would almost certainly be worse overall... (I'm more thinking out loud than trying to make an argument.)

hhw 9y ago

In a world where more and more power is concentrated into fewer and fewer large corporations, I'm not so sure this is crazy that they're not allowed to do this, nor that it would be a good thing if they were. The natural result would be that different states or nations race to the bottom chasing the corporations to locate there, depriving their citizens of substantial tax revenues that could have been used for the public good. Even if you're against social programs, there is still common infrastructure that everyone benefits from such as roads that need to be paid for.

namlem 9y ago

Yeah, but when states do it in the US it ends up as a race to the bottom. The losers are all the states that participated and the winners are big corporations and their shareholders.