4 ms·

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

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.

deleted 12y ago
[deleted]
- jk4930 12y ago
  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.
  - riffraff 12y ago
    except this is not asking ireland to raise their low tax rate, it's about closing a loophole that allows companies not to pay taxes in ireland either.
  - bhc 12y ago
    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.
tomp 12y ago
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.
patrickk 12y ago
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: http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html 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.
- lettergram 12y ago
  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).
  - ewoodrich 12y ago
    >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.
    - nitrogen 12y ago
      Has anyone provided numbers on the percentage of deficits that would be covered by closing loopholes, and the following effects on the global economy?
  - logfromblammo 12y ago
    That is true in the modal case. 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.
anemitz 12y ago
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:)
- nickff 12y ago
  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'.
  - dragonwriter 12y ago
    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.

deleted 12y ago

[deleted]

jk4930 12y ago
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.
- riffraff 12y ago
  except this is not asking ireland to raise their low tax rate, it's about closing a loophole that allows companies not to pay taxes in ireland either.
- bhc 12y ago
  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.

tomp 12y ago

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.

patrickk 12y ago

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: http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html 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.

lettergram 12y ago
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).
- ewoodrich 12y ago
  >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.
  - nitrogen 12y ago
    Has anyone provided numbers on the percentage of deficits that would be covered by closing loopholes, and the following effects on the global economy?
- logfromblammo 12y ago
  That is true in the modal case. 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.

anemitz 12y ago

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:)

nickff 12y ago
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'.
- dragonwriter 12y ago
  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.