International Corporate Tax

“Ireland is not a tax haven”
Well, the US Senate says otherwise. Loudly and clearly. Many many times.

http://www.ft.com/intl/cms/ab635df2-c18c-11e2-b93b-00144feab7de.pdf
Page 3 : “A number of studies show that multinational corporations are moving
“mobile” income out of the United States into low or no tax jurisdictions, including tax havens such as Ireland, Bermuda, and the Cayman Islands” This links to a longer study
and as they say … et seq
We may think we are not a Tax Haven. We may even not be one. But that hardly matters if those that count think we are. Now why would they think that?

As has been hinted at above, the truth really doesnt matter, and trying to get US senators to stop talking in soundbites is a futile endeavour. Politics always wins over reality sure

http://www.guardian.co.uk/technology/2013/may/15/amazon-tax-bill-new-questions

“Meanwhile, job adverts posted this month on the careers page of Amazon.co.uk invite application for scores of roles in the UK. Among them is a vacancy for a senior financial analyst. “Based at our UK Head Office in Slough, Amazon seeks a Senior Financial Analyst to support Amazon UK’s Merchant Services business,” the advert said.
“This Senior Financial Analyst will help establish revenue targets, lead pricing analysis and recommendations, generate competitive analysis and support key operations metrics and goals.”
The Slough office is also this month looking for applicants to its MBA leadership development programme in the UK. “From day one, you will be given ownership of large, complex problems in various areas of our business,” the advert states.
Despite booking a tax charge of just £3.2m in its UK accounts for 2012, Amazon received £2.5m in government grants as well as significant tax breaks for building new warehouses. It opened a new site at Hemel Hempstead in September.
The company would pay much more tax if its sales were booked through a UK business but they are all routed through Luxembourg. Altogether it has taken £12bn from online shoppers in the UK in the last four years.
Amazon avoids paying many tens of millions of pounds in tax because it tells the taxman its main UK-focused business, which collects revenue from British shoppers but is incorporated in Luxembourg, cannot be classed as a “permanent establishment” in Britain.
Amazon has a permanent establishment in the UK that operates the warehouses and provides “corporate support services” to the wider group. Despite employing 4,191 staff – and an additional 10,000 temporary workers to cope with the Christmas rush – it had a tax bill for 2012 of just £3.2m because British shoppers are invoiced from Luxembourg.
Margaret Hodge, chair of the public accounts committee, said: “My committee has real concerns about the extent to which companies like Amazon are stretching the rules in order to avoid paying their fair share in tax.
“By any measure of common sense Amazon appears to have a proper established presence in the UK, and that there is a discrepancy between some of the evidence in this report about its activities in the UK and what the committee was told by Amazon when they appeared before us last year. We will now consider whether we need to recall them to explain that discrepancy.”
Six months ago Amazon told Hodge’s committee: “All the strategic functions for our business in Europe [including the UK] are based in Luxembourg. That could be our retail business, our third-party business, our transportation teams, our customer service, HR, finance.”
UK staff, he added, were only offered “support” to these activities.
Hodge has recalled the UK boss of Google and the head of tax at Ernst & Young, the accountancy firm which advises Google and Amazon, to answer new questions raised about the search firm’s low tax bill. The recall was prompted by a Reuters investigation which focused on Google’s claim its UK-revenues were not part of a taxable British business.”

@ Seamus Coffey

Lets not quibble about what’s a ‘tax haven’ and in 2009 the Dutch were upset when the Obama administration labelled the Netherlands a tax haven.

Using techniques with nicknames such as the “Dutch Sandwich,” multinational companies routed €10.2tn in 2010 through 14,300 Dutch “special financial units,” according to the Dutch Central Bank. The Netherlands hosts 20,000 mailbox companies.

Lets say tax haven activities tend to be concentrated in some countries.

You say: “There are no special corporate tax rates in Ireland.” but the panel reports:

Apple told the Subcommittee that, for many years, Ireland has provided Apple affiliates with a special tax rate that is substantially below its already relatively low statutory rate of 12 percent. Apple told the Subcommittee that it had obtained this special rate through negotiations with the Irish government.

It also appears that Apple was facilitated in using what it regarded as stateless Irish companies as resident companies for booking foreign income.

No tax filings anywhere in respect of Irish companies with billions worth of transaction. It makes Anglo Irish Bank seem like Noddy’s playtime.

Senator Carl Levin’s record in particular is not characterised by ‘political posturing.’

Irish policy makers have for long assumed that the veto on tax harmonisation could protect Ireland’s position and there is no threat to the corporate rate but with little gain for itself, Ireland has facilitated massive tax avoidance.

Some politicians maybe posturing but at a time of cuts, falls in income or stagnation for decades, coinciding with stock market records and a growing imbalance between capital and labour, people are right to protest.

Profit margins were at their highest level in 2010 since the mid-1960s, according to Michael Cembalest, the chief investment officer of JP Morgan Chase. He said: “There are a lot of moving parts in the margin equation,” but “reductions in wages and benefits explain the majority of the net improvement in margins.” This decline in wages and benefits, Cembalest calculated, is responsible for about 75% of the increase in major US corporations’ profit margins.

At a personal level, Europe has had a strange toleration for tax havens that facilitated rich citizens of neighbouring countries to engage in criminal activity.

At company level, tax authorities are much more likely to hold local companies to account than big international companies. The accounting transactions are also much more likely to be termed false accounting than if a big name company was involved.

Besides in Ireland, the huge rise in tax-related revenue diversions has given a false sense of economic improvement: today an article in the Independent begins: “IRELAND’S booming exports are seen as the main evidence that our bailout is the only one that can be called a success.”

The real facts show that this claim is a fairytale — but don’t underestimate that market.

Dell closed its Limerick plant in Ireland in 2009 and its Polish output makes it Ireland’s biggest goods exporter today.

Eric Schmidt, Google’s executive chairman, on Sunday gave support to corporate tax reform and he correctly said that it was the politicians who make the laws. He didn’t note that in Washington DC’s system of legalised bribery, big companies like his, have significant power.

If the US changed its tax system from a worldwide one, to a territorial one, the only way it could protect its tax base is to set minimum tax rates for low-tax jurisdictions such as Ireland.
Keep in mind about Ireland’s dual economies, full-time jobs in the exporting sectors are at a 13-year low; almost two-thirds of private sector workers are in non-exporting firms.

@ Fiatluxjnr

Apple International Sales had a “turnover” of 74b from 2009-2012. Does this mean that our export figures are overstated by this amount?

Yes

We don’t know how much they leave in Ireland at a year end as the accounts have been shielded from public view since 2005.

@ MH
Thanks. Interesting how we “legitimately” inflate the numbers. So it seems the export “surge” is a mirage.

But this is troubling..
““The Apple case study examines how Apple Inc., a U.S. corporation, has used a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than 2%.”

If this is an accurate reflection of Apple’s submission to the US Senate then someone is being economical with the truth.
Porkys to the Senate are frowned upon. Better plead the fifth.

From the NewYork Times-“Apple Operations International, which is incorporated in Ireland — where Apple had negotiated a special corporate tax rate of 2 percent or less in recent years — but keeps its bank accounts and records in the United States and holds board meetings in California.

Because the United States bases residency on where companies are incorporated, while Ireland focuses on where they are managed and controlled, Apple Operations International was able to fall neatly between the cracks of the two countries’ jurisdictions.”
So the company is incorporated in Ireland but is not resident for tax purposes in any??
So it wouldn’t be included in the revenues figures above for gross or taxable income presumably?
When does legitimate avoidance become evasion? When the company is not even resident to pay tax in any country?

2003 was a special year for Ireland.
It was the year that our corporate tax rate as a % of the total tax rate began to decrease (well before the recession kicked in) This was a tipping point where Ireland became less attractive low tax economy and became more of an enabling conduit for global tax avoidance.

Still calls of fowl play from Washington are a little hard to take.
The funny thing about being the major superpower is you often see the splinter in the eyes of others while ignoring the planks in your own.
That’s how you get to remain the superpower I guess.

Another clear and coherent post from Seamus Coffey. His blog is also excellent, full of coherent, objective analysis:
http://economic-incentives.blogspot.ie/

Royalty payments for intellectual property, such as branding and search algorithms, paid to foreign tax domiciled companies are counted as imports and subtracted from Irish GDP. As Seamus points out, this intellectual property was neither developed here nor owned by Irish companies so it’s not part of our taxable value-add.

Computer services and IP royalty exports and imports are reported by the CSO.

The question is whether the tax treatment of royalty payments is any different in Ireland from other European countries. Starbucks came to the attention of the UK press recently for not paying tax on gross income. Clearly the Starbucks branding and formula is worth a lot to a coffee shop so it is natural that rental payments for using these imported intangibles leaves the country.

This 2% could be a problem…
As reported by NYT..
“Atop Apple’s offshore network is a subsidiary named Apple Operations International, which is incorporated in Ireland — where Apple had negotiated a special corporate tax rate of 2 percent or less in recent years — but keeps its bank accounts and records in the United States and holds board meetings in California

@ colm,

Revenue spokesperson:

Revenue does not do special tax rate deals with companies. There is no special extra low corporation tax rate for multinational companies.

All companies in Ireland pay the standard 12.5 per cent rate on their trading profits arising in Ireland and they pay a corporation tax rate of 25 per cent on their Irish non trading income.

As reported here (also with comments from the DoF).

http://www.thejournal.ie/apple-ireland-tax-918635-May2013/

Jesse Drucker of Bloomberg:

“Meanwhile, Ireland, already an attractive destination for multinational companies, is making it even easier for them to avoid taxes.

Last year, for example, Irish revenue authorities agreed to let Google make billions of dollars in royalty payments directly to a Bermuda subsidiary, helping to cut the company’s tax bill by at least $2 billion a year, according to U.S. and overseas securities filings. Previously, Google had routed those payments through a shell company in the Netherlands to avoid a 20 percent Irish withholding tax on payments destined for island havens. According to a person with knowledge of the arrangement, Ireland agreed to accept an additional tax well below 20 percent in exchange for the favorable treatment.”

http://www.bloomberg.com/news/2013-05-13/europe-eases-corporate-tax-dodge-as-worker-burdens-rise.html

But Ireland is most definitely not a tax haven.

Luxembourg was being used as a billing location as it had the lowest VAT rate in the EU and VAT was based on the rate at Point of Sale but that is changing from 2015 when the rate applied should be based on the rate applicable to the location of the purchaser.
Big VAT loss to Lux but probably won’t change the corporate structure though
so Lux should continue to get the Corp tax income.

@Ossian

“Royalty payments for intellectual property, such as branding and search algorithms, paid to foreign tax domiciled companies are counted as imports and subtracted from Irish GDP. As Seamus points out, this intellectual property was neither developed here nor owned by Irish companies so it’s not part of our taxable value-add..”

This does indeed sound and reads dandy – but the problem with the arrangement is the substance of what actually goes on in Bermuda.

I’m pretty sure most of the operations in Bermuda and the BVI are nothing more brass plate operations. Why for instance would Google or Apple pay billions of dollars to an office location which employs a handfull of people making sure the bank recs are completed on time for the monthly accounts? I appreciate the bank recs are big numbers but hardly warrants paying the employees billions?

In order words the underlying substance of what is going on is not commerce per say but tax avoidance (legal I know) but it still amounts to tax avoidance as the rationale for transferring billions of dollars to a one man and his dog office can’t really be labelled as anything else.

Therein lies the real problem – its not residency per se, its commercial substance. If the companys had to prove on an ongoing basis there was a real commercial substance behind these transfers rather than the taxing authorities having to make the case then I’m absolutely confident it would cease rather quickly. Paying Royalities by the billion to Bermuda would suggest that in Bermuda one would expect to see thousands of IT tech heads beavering away. Not so it seems.

A few years ago the institution I was working with were asked to prove the underlying rationale and substance behind our transfer pricing transactions. We failed to make the case robustly enough and lost.The HRM tax authorities eventually got paid plus significant interest and penalties. Our residency argument counted for nought as the income was deemed to have originated in the UK.

hope the link works,if not cspan has it-secongd link-live now.

http://www.hsgac.senate.gov/subcommittees/investigations/hearings/offshore-profit-shifting-and-the-us-tax-code_-part-2

http://www.c-span.org/Live-Video/C-SPAN3/

The Bermuda based company owns the right to profit from Google’s technology and brand outside of the USA. How was this right acquired? Has anyone shown that Ireland treats royalty payments any differently to other EU countries?

Presumably the capital value of ex-USA IP rights for a company like Google are worth >$100bn given that a majority of sales are outside the US and market cap is in the hundreds of billions.

This issue is not going away. Michael H has been pressing on the “real” level of exports for a while. I and others have noted the need for a debate on the corporate tax level (not just rate).
Saying the rate is the rate is one thing ; putting in place, and I for one do not imagine that this was done by revenue etc without external prodding and lobbying, a set of exempptions such that the effective rate is much much less, thats a horse of a different colour.
We need to stop facilitating tax arbitrage and get on with deciding what we really want as an economy and society. Smoke and mirrors or reality …

This is even all over the German tech press:

http://www.heise.de/mac-and-i/meldung/Irland-bestreitet-Steuerverguenstigungen-fuer-Apple-1866364.html

Methinks Gilmore is trying to close the bag after the cat has bolted.

It hasnt gone away you know
https://twitter.com/SiCarswell/status/336851378188206084

Even with Shatter gate, abortion and all this is a real story. We have built our economic model on, in large part, a tax arbitrage facilitated FDI base. that flapping sound is a herd of fowl coming home to roost…

@ All

For a true flavour of what this is all about, the intervention of Senator Rand Paul and the reply of the Sub-Committee Chair Senator Levin in the first video linked to by John Gallaher above is worth a listen. (57 minutes in).

As Senator McCain, referring to Ronald Regan, states; “facts are stubborn”. Either there is a special negotiated tax rate for Apple as claimed by him or there is not. If there is, it is a clear case of discrimination and open to legal challenge by the Commission. As Ireland’s entire tax strategy is based on (i) the principle of non-discrimination (hence the introduction of the same corporate tax regime for all companies!) and (ii) transparency, it will be interesting to see what emerges as between the the only instances that can clarify the position i.e. the parties to the supposed negotiation. The position of the Revenue Commissioners has already been made clear.

@ Brian Lucey

This is about taxes, not moral philosophy!

Err. no. Its exactly that. Its political economy and this is that. Economics needs to go back to its roots.
You want to defend this? Be my guest. I always love seeing the indefensible defended.

@ DOCM

Taxes are about the sovereign-state taking resources from market activities for collective investment. It is about the politics of distribution. Therefore it most definitely is about what is ‘right’ and what is ‘wrong’. Call it moral philosophy if you like. I call it political economy. Adam Smith did not see a difference.

@ Brain Lucey

There appears to be a conflict with regard to the facts. I have set out what is known to those – like myself – with no knowledge other than what they read in the media. I await the definitive outcome; assuming there is going to be one.

@ Aidan R

It is indeed. Ireland is such a state and it administers its taxes in conformity with all established international codes.

@ DOCM

True. But that technical-legal conformity does not mean that facilitating tax avoidance is okay or the right thing to do. Most Irish and US banks were conforming with the law six years ago. Does that mean that we should not challenge their actions or behavior?

@ Brian L

do you agree or disagree that “big countries” (ie where most of these companies have their parents and shareholders domiciled) could end this issue relatively easily by closing legislative loopholes at their end? If you agree, why then is Ireland painted as the facilitator in all of this? I would argue a system of global tax minimisation has been allowed to expand over the last decade or two, and Ireland has simply been quite good at benefitting from that.

@ Aidan R

Absolutely not! If you have had occasion to read some of my other posts, you will have noted that I am totally committed to the principle of all paying their levied taxes, including assessing all able-bodied adults other than those in full-time education. But what is at issue here is a matter of negotiated arrangements between sovereign states where each must accept their share of responsibility. Landing it all on one – and not the biggest – as a fall guy is not IMHO very sensible.

@ DOCM

Agreed. But I don’t think Ireland is a fall guy here. Ireland has been an active participant and promoter of international corporate tax competition for years. The government – with active support from the media – have successfully kept it a low salient political issue. The sooner we are exposed the better. Our opposition to the coordinated financial transaction tax in the EMU is a perfect case in point. For years we have adopted a beggar thy neighbor approach to the Eurozone (a semi-closed trading economy). We actively defend the narrow interests of our financial sector in order to seek comparative advantage over other countries. This economic strategy is not lost on our European partners. Not least the Germans. The Irish are great at blaming others. But on the issue of international corporate tax competition we are completely naked.

@ brian,

As I see the issue of how much tax corporations should pay is a separate issue. The issue is whether Ireland has “hard questions” to answer in the current international system of corporate taxation. My opinion is that the role of Ireland is being hugely overstated.

The “same country exemption” that allows the “Double-Irish” scheme (two companies in the same country) to function is a provision of the US tax code. The “Double-Irish” reduces a US company’s US tax bill. It is not effective for non-US companies and has little impact on the amount of tax paid outside the US.

It is the transfer pricing rules operated in the US that allows US-created intellectual property to be moved to jurisdictions such as Bermuda which further boosts the effectiveness of the “Double-Irish”.

I really would like to know what it is precisely we are supposed to do about this. We charge 12.5% on the profits generated in Ireland.

The US is in a bit of bind. It has a 35% corporate tax rate but double tax agreements mean that companies get credits for tax paid elsewhere. If the companies paid 12.5% in Ireland they would pay around 22.5% in the US. As it is the companies pay 0% in places like Bermuda and the US would get 35% when the money is repatriated. The problem for the US is that the money is not repatriated and exemptions in the US tax code allow for this deferral until repatriation.

The US would like to find a way where companies continue to pay 0% in Bermuda and then it can collect its 35%. A situation where the companies pay more tax somewhere else (even 12.5% in Ireland) is not in the US’s favour because it reduces the amount of tax it can levy.

It is up to the US to solve this problem and asking hard questions in Ireland is largely irrelevant. A debate on how much tax corporations should pay is probably more important but that is not the issue being discussed.

Mr Bullock…….”in accordance with our agreement” with Ireland….hmmm

Corporate tax rates in Ireland might be an issue of political economy but they are more realistically one of international political economy; we have absolutely no control over larger trends in the global economy and have to adapt as suits to protect our interests. As such where is the evidence: (1) That there are any significant economic benefits in scrapping the low corporate tax rate (2) that we can feasibly build a political constituency to do this, and that it would be worth the political capital we expend on it (3) That there is a realistic alternative to building a model on “ tax arbitrage” (or even that this is what we’ve done)

By all means lets develop an ‘alternative model’, but let’s first decide what it is before we scrap the old one, and that it has the support of enough domestic (and global) interest groups to make it politically feasible. Having a ‘conversation’ is not enough

There seems little point in talking about the politics of distribution domestically without acknowledging the politics of distribution in the global economy

@ RF

“There seems little point in talking about the politics of distribution domestically without acknowledging the politics of distribution in the global economy”.

True. It is for this very reason that I talk about the Eurozone (the second largest trading zone in the world) and the aggressive tax-competition strategy of one region within it: Ireland.

Cook’s statement getting ripped apart by – David Kocieniewski-NYT-Link above…
“1) “We don’t rely on tax gimmicks.” The precise definition of the word “gimmick” may be debatable, but Apple’s use of two Irish entities, which it claims are stateless (and help it sidestep $10 billion per year in taxes, according to the Congressional report) would seem to qualify.

2) “We don’t move its intellectual property into offshore tax havens.” Apple’s intellectual property is held by its Irish subsidiary, Apple Operations International, which has no employees or physical presence in Ireland, has received $30 billion in income since 2009 and paid no income tax to any government for the past five years, according to Congressional investigators. Ireland is not on the official list of tax havens compiled by the Organization for Economic Cooperation and Development, but it is offshore and Apple’s special deal with the country allowed the company to enjoy rates lower than some companies that shelter income in the Caribbean. What’s more, Apple’s unique agreement hinges on its ability to take advantage of a wrinkle in Irish tax law that allows it to avoid Irish taxes by holding a fraction of its ownership in a shell company called Baldwin Holdings Ltd. in the British Virgin Islands.”

Wall to wall coverage over here…’special deal’ keeps getting mentioned !!!!

@MH………right then…but but..Gilmore/Kenny ?
“This afternoon, Taoiseach Enda Kenny told the Dáil that Ireland “does not do special tax rate deals” with companies.”
http://www.rte.ie/news/business/2013/0521/451564-apple-tax-arrangements/

Apple paid 10 m on 22,000,000,000 of sales…a rate of 0.05%… Source RTE 6.1 news.

How?

Senator Levin just repeated “the deal” on live TV. Who is lying….or maybe it is all a misunderstanding. After all they don’t pay 2%….just 0.05%.

It looks like the game is up.

Not so sure it will affect us badly ….yet. FT story today about multinational pharma company Warner Chillcot being acquired by Activis for 8.5b dollars. Apparently Activis will move its headquarters to Ireland for “synergy”.
Up go the export figures again!

@ Aidan R

I am not a fan of excessive reliance on FDI. But that is a separate issue. If you think that Ireland is exceptional in defending what it perceives as her national interest, you need to think again.

On the FTT, for example, the situation is far from being as straight-forward as you suggest. Both the Bundesbank and German industry have come out against it; not the weakest of combinations!

http://www.ft.com/intl/cms/s/0/b8cdc3e6-bef9-11e2-87ff-00144feab7de.html#axzz2Tm3Lq1q0

As to the Senate hearings, when the chairman cannot even get the level of Ireland’s corporation tax right, the general level of the competence of the committee’s staffers must be in some doubt.

We are green enough as it is. Let’s not add to it!

“There are no special corporate tax rates in Ireland. There are rules (which apply to all companies) on how taxable income is calculated to determine the figure to which the 12.5% rate is applied.”-above.

PG.20/21…report….
“Since the early 1990’s, the Government of Ireland has calculated Apple’s taxable income in such a way as to produce an effective rate in the low single digits …. The rate has varied from year to year, but since 2003 has been 2% or less.”

oh ok……

@ Seamus Coffey

‘Ocean Income’ I love it!

Dublin cut Apple tax rate following US lobbying

http://www.ft.com/intl/cms/s/0/ee6c1b64-c1f2-11e2-ab66-00144feab7de.html

“For example, in 2011, 64 percent of Apple’s global pretax income was recorded in Ireland, where only 4 percent of its employees and 1 percent of its customers were located, Mr. Harvey said.”

64% of pretax income is Ocean money. Maybe Di Caprio will make a film.
Ocean ?

Fascinating discussion, and long overdue, IMHO.

@Aidan R 2.15

‘Rather than the state ‘taxing’ market activities to pay for the crisis they now ‘borrow’ it from the same markets.’

While so many good points have been made, I think you come nearest to the heart of the issue. Hayekian ideas provided a necessary antidote to overweening state power, but an obsession with ‘free markets’ leads to another form of tyranny. The reality is that market participants have very different levels of power, and that the resulting ‘freedom’ is very unequally distributed.

The nation state, for all its faults, is, as Pierre Bourdieu puts it, the repository of hard won freedoms and rights. It is the nearest thing we have to the general interest, and Polanyi showed in his 1947 Great Transformation, it provides the framework within which market activity is properly regulated.

We are a very small nation. We are faced today with the overwhelming power of transnational private entities which have inserted themselves into the heart of the biggest governments. Haughey and Co saw how little Ireland could make itself useful to ‘international markets’, so we have bred a whole tribe of ‘fixers’. Traditional religion may be on the decline in Dublin, but social magic is alive and well.

‘The constitutional order of the 21st century market state will supersede the 20th century nation state as a consequence of the end of the Long War. A constitutional order is distinguished by its unique claim for legitimacy. Give us power, the nation state said, and we will improve your material well-being. The nation state, with its mass free public education, universal franchise, and social security policies promised to guarantee the welfare of the nation; the market state promises to maximize the opportunity of the people, and thus tends to privatize many state activities. Voting and representative government will be less influential and more responsive to the market. This does not mean that market states cease to be interested in the well-being of their peoples or that nationalism is any less potent, but that the State no longer claims legitimacy on that unique basis’

http://en.wikipedia.org/wiki/The_Shield_of_Achilles:_War,_Peace,_and_the_Course_of_History

@ DOCM
‘I am not a fan of excessive reliance on FDI. But that is a separate issue. If you think that Ireland is exceptional in defending what it perceives as her national interest, you need to think again.’

What is the national interest, and how is it represented by the insiders and lobbyists who have penetrated our state so thoroughly. ? As Joe Lee put it in his Ireland 1912-85 p654

‘ The beauty of traditional morality was that the area to which it applied was so conveniently circumscribed. Traditional Ireland had largely succeeded in excluding from the agenda of moral discourse doctrines potentially subversive of the material interests of the dominant social elements’

Plus ca change.

Have a look at the principal executive offices of the largest disk drive manufacturer in the world, Seagate – an Irish company.

For Apple:

What’s more, Apple’s unique agreement hinges on its ability to take advantage of a wrinkle in Irish tax law that allows it to avoid Irish taxes by holding a fraction of its ownership in a shell company called Baldwin Holdings Ltd. in the British Virgin Islands.

The Irish tax and intellectual property laws enable huge tax arbitrage. To suggest that country-specific rules are not involved is disingenous, at best. It is Irish government strategy to make Ireland a base for intellectual property management, and the tax laws are a key element of this. Apple, Google, Microsoft, Seagate etc. route all their non-USA income via Ireland for a good reason.

It is not the USA that has to bear the real consequences of this. The USA is out-of-step with the rest of the world by regarding worldwide citizen and corporate income as taxable. Apple pays taxes on profits earned in the USA and does not use its Irish operations to reduce its USA tax. The main problem is that, for example, Apple paid no taxes on profits earned in Spain (who with 25+% unemployment could do with the money).

Of course Ireland is facilitating tax arbitrage. There’s no point in denying the obvious. It is in Ireland’s interest to do so, but it should come as no surprise when there are aggressive moves to stop this by other countries, protecting their own interests. How much can be done by domestic or EU laws (CCCTB) in other countries (cutting off the flow of profits to Ireland at source) and how much will require Irish law to be changed (via political pressure) remains to be seen.

http://www.welt.de/wirtschaft/article116397191/Apple-fand-heiligen-Gral-der-Steuervermeidung.html
Whatever way you cut it; Message in Germany very clear: Ireland is enabling this. Grist to the mill in all financial press headlines.

If the music stops and competition is no longer allowed on Corpo tax. Then surely it would have to be an international agreement. Say then there’s no tax advantage to having your European HQ in any European state over another.

Why would the existing jobs leave? If I was an American Multinational in Ireland and there was no tax advantage to moving elsewhere then why would I move in Europe?

In fact even new NMCs would still want a country that speaks the language and is in the Euro. Not that the current arrangements have added much jobs in a decade (read MH)

In any event, it certainly looks like the coming years will show just how ‘competitive’ we really are.

@ Tull
I agree in the sense that we need to look at our economy. Be honest with ourselves and develop actual policy. We still don’t know where on the ‘Boston or Berlin’ spectrum we want to be.

We can start with Energy policy. The current ‘policy’ isn’t exactly transparent in terms of true cost.

How about education policy. It seems to consist of trying to send as many people to university as possible so they’ll be well educated once they arrive in Australian and Canadian. Not everyone is suited to or will benefit from university. Germany seem to have a great system of trades people feeding business, feeding trades etc..

How about the dangerous inequities being created between the new, usually young, more motivated, better educate staff on worse pay/T+C in the public/civil service and the older pre-bubble burst employees. Easiest political solution but not great for moral.

How about the Irish language. We’re either serious about creating a bi-lingual society or we’re not.

How about pension policy?

How about pre-school education? We’re spending a lot of money educating young women, only to force them (usually the woman, tho not always!!) out of the work force for years due to the high cost of child care. Or force them to have less children, depending on the choice of the couple.

How about immigrant integration policy? Sweden now added to the list with England and France of countries that have seen riots, aka serious problems with integration, due to a lack of serious policy over the last few decades.

How about learning the lessons from the boom. Caps on earnings to borrowing ratios. Limit on Loan to value eg 20% deposit. Make new mortgage lending non-recourse. Let us not have another bloody boom/bust property cycle. Look around, they are baaaaddddd for society. Let us promote investment in SMEs, actual industry, not another round of speculative property price betting.

And of course how about our current debt slaves. Though at least they’re being talked about. Though it hasn’t exactly been a prompt process to date.

The list of issues goes on…

@dorathy jones

Therein lies the danger. Plays right into Schauble’s hands.

The obsession with attracting foreign companies comes at a cost – in particular in a system of limited accountability.

It was funny to read reports in recent weeks on Michael Noonan’s response to questions on the international clamour about tax avoidance.

He spoke of the importance of defending the corporate tax rate – knowing that journalists were not well informed about the issue.
Allied to the small mainstream media, it’s unusual that in Ireland’s national parliament, members don’t specialise in particular areas. So lacking forensic facts, they generally are incapable of putting ministers under pressure.

Richard Bruton’s department insisted to me that there is no one official figure for the total value of 2012 exports. €182bn is the preferred total not €177bn, the CSO’s total after deducting €5bn from the goods total because of double-counting.

Eamonn Gilmore used the term ‘transparent’ for Ireland’s tax system yesterday.

Last January in Davos, Enda Kenny said Ireland’s tax regime is “very clear, very transparent.” He also said the effective corporate tax rate is 11.9% compared with the headline rate of 12.5%. One claim was false and the other was very misleading.

In the same month Bruton had used the 11.9% figure at a press briefing.

The 11.9% rate comes from a report, ‘Paying Taxes 2013,’ that was produced by PricewaterhouseCoopers (PwC), the Big 4 accounting firm.

The case study company is:

1) A limited liability company;
2) Produces ceramic flower pots and sells them as a retailer;
3) Operates in the country’s largest business city;
4) Is 100% domestically-owned and has 5 owners;
5) Has purchased capital equipment for use in the business;
6) Has 60 employees;
7) Sells a property and realises a capital gain during the year;
8) Pays a dividend at the end of the year;
9) Is in its second year of operation;
10) Has a trading loss brought forward from previous year.

Post the crash, decision makers from ministers to senior civil servants, university heads, the mainstream media, professions etc, are older men who are protected from the ravages of the recession; many had believed that the free lunch had been invented and now they are oblivious to the shifting sands under their comfortable seats.

This year 2013 was the one when Ireland was to be recognised as a “world class knowledge economy” and the failure has given way to a new vision: “Ireland in 2020 is the best country in the world for scientific research excellence and impact.”

This is the flagship enterprise policy at a time of a national jobs crisis and the failure has been met by silence from ministers; the Oireachtas; the well-heeled vested interests! and The Irish Times, the “newspaper of reference.”

Statistic of the Day: Only 25% of IDA Ireland client companies spend more than €100,000 annually on R&D despite a 25% R&D self-assessed spending credit.

More here…

http://www.finfacts.ie/irishfinancenews/article_1026011.shtml

As for the indigenous sector, what is really known about it?

Yesterday, the Examiner had a piece on manufacturing (see below).

Here is another statistic that is unlikely to become a ministerial taking point: “Only 3% of Irish SMEs are active in manufacturing, whereas the equivalent figure for the EU is 10%.”

Ireland may benefit from the increase in wages in China as a growing number of companies look to bring manufacturing back to their core markets.

Hourly wages in China have increased by over 400% since 2001 and, coupled with the time difference and an average shipping time of six weeks, the attractiveness of manufacturing in the East may diminish for some sectors. 

The Cork Electronics Industry Association will hear from Caroline Dowling, president of integrated network solutions at Flextronics, who believes now is the time to bring manufacturing industries back to Ireland. 

“This is an ideal time for Ireland to harness the opportunity that re-shoring presents,” she said. 

It depends on what markets are being served.

Likely behind a pay wall but today’s New York Times/International Herald Tribune Front Page headline is:

‘Dublin on Defense against Tax Critics’

All fairly predictable stuff.

With Robert Browne ( and others), long before the advent of the current government and the Troika one attempted to flag the urgent need for outside strategic advice ( a sort of Telesis II), with a view to formulating a NEW enterprise strategy… and a different way of looking at ’emigration’.

http://www.irisheconomy.ie/index.php/2011/02/02/taoiseach-from-mars-a-guest-post-by-richard-fedigan/

Who’s in charge?

@Seamus Coffey

While US companies predominate, there appear to be some others that use the system too. Possibly the most bizarre example is this – a state-owned company using the system to avoid paying taxes to the state that owns it.

State-owned railway group NS uses Ireland to dodge Dutch taxes

The state-owned Dutch railway company NS has managed to cut its Dutch tax bill by at least €250m since 1999 by routing the cost of new trains through Ireland, the Volkskrant reported at the weekend.

The tax dodge means the treasury has lost out on income generated by a company it owns, the paper points out. The finance ministry, meanwhile, is said to be ‘unhappy’ about the arrangement, which it has been aware of from the beginning.

In effect, NS’s Irish subsidiary, NS Financial Services, has spent €1.7bn on new trains which it then rents to the NS in the Netherlands. None of the trains has ever been used on the Irish railways, the paper said.

Some great posts above.

For background in the USA:

‘Behind the Decline in Labor’s Share of Income’

And related papers.

“Economists have identified three long-term factors that can explain why the wage-productivity gap has widened and the share of income accruing to labor has declined. The first is the decrease in the bargaining power of labor, due to changing labor market policies and a decline of the more unionized sectors. Another factor is increased globalization and trade openness, with the resulting migration of relatively more labor-intensive sectors from advanced economies to emerging economies. As a consequence, the sectors remaining in the advanced economies are relatively less labor-intensive, and the average share of labor income is lower. The third factor is technological change connected with improvements in information and communication technologies, which has raised the marginal productivity and return to capital relative to labor.”

http://www.clevelandfed.org/research/trends/2012/0212/01gropro.cfm

In the EZ/EU

‘2013 edition of the ‘Taxation Trends’ report’

Slide on page 6 shows the steep fall from 1995 in corporation tax rates.

http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_structures/2013/presentation.pdf

I’d echo Seamus on what exactly is wanted from Ireland in terms of unilateral action?

Are we that unique? Couldn’t these companies setup subsidiaries in Cyprus, Lux or the Netherlands if conditions here became ‘uncomfortable’?

Also, do some of the domestic commentators here really think things would be better for Ireland is these companies didn’t or couldn’t operate the way they currently do?

@ Michael Hennigan
Thanks for pointing out that the report that has been quoted by various politicians on Prime Time and by Chris O’Donoghue on news talk on several occasions, has been completely debunked. Its based on an imaginary hypothetical company. Why use that when we can use actual reality? Oh!

So every time someone says Irelands effective tax rate is 11.9 and Frances is only 8.9 can every one please let them know they are using bad data.

Ireland’s Effective Corpo tax rate is no where near the headline rate. How could it be when MNC’s account for about 80% of our corpo tax take.

http://www.irishexaminer.com/opinion/columnists/colette-browne/little-people-pay-the-price-as-big-businesses-avoid-their-fair-share-231914.html

Great article by Colette Browne.

Seamus OP published in the Examiner today.

http://www.irishexaminer.com/opinion/columnists/guest-columnist/the-us-just-wants-its-bite-of-apple-231983.html

The higher rate was for services; the 10% for manufacturing – there was no distinction between foreign and domestic.

My understanding is that most SME’s can also take advantage of the 12.5% corporate tax rate, contra Colette Brownes claims they are taxed to the hilt?

@ RF
She is not referring to Profit tax.
She is referring to rates, VAT, Employer taxes etc.

The Vast majority of Small Irish businesses do not even make profits and therefore do not pay Corpo tax.
Infact it was said recently by the Central bank that half of small businesses in Ireland have impaired loans.

She is trying to get people to look at the bigger picture where Profits have been shifting away from what the Americans call Main Street and has been flowing into WallStreet (financial and tech companies).

@ JG

On reflection, the analogy with the dead parrot in Monty Python does not really work. The international tax forest is full of live parrots and it seems that there are several species from the US i.e. the tax deals cut with individual companies by individual states.

Some observations on the interesting discussion:

MNCs are holding huge amounts of cash on their balance sheets – partly this is because they can avoid paying tax by keeping offshore. Taxes might help the CFO’s who measure themselves on EPS/ free cashflow to do something with the money more than keeping in the bank or handing back to shareholders.

If an MNC is big enough to avoid paying tax, then this gives it a clear advantage over a smaller domestic competitor (who cannot) and is not conducive to a healthy competitive environment.

For some MNCs (like Amazon) corporate profits are small – as they operate on tight margins and invest massively in R&D for the long game, so frankly corporation tax is minimal in comparison to local sales taxes that they do pay.

The tax code rules around nationality/where business is conducted/executed are no longer applicable to cloud-based software companies – this has implications for sales tax as well as corporation tax.

From Ireland perspective, if our politicos get their head around it, the international attention actually provides great cover for us to remove the loopholes that lower the effective rate – we are just being a good international player. The (accidental!) impact of this should be that tax revenues from MNC sector should increase.

Are we confident enough in our spiel re educated workforce/gateway to Europe/good place to do business etc.. to carry this out?

Apple Located in Europe to get access to the European market. It chose Ireland due to the tax advantages associated with here. The whinging from the US is not our problem. It’s there own problem for having too high a rate.

We have two options (1) crack down on tax deductible royalty payments along with R&D relief to lose the image as a Tax Haven. This will lead to us losing these US MNC’s who have created jobs which leads to a flow of capital into the economy and income , employer taxes collected.

(2)Ignore the protestations and wait for international agreements on tax rules. In the long run we are likely to lose these companies but we are better off keeping them for as long as we can.

@ Seamus Coffey

[On your “statistic of the day”]

What I was highlighting here was the delusion that a country like Ireland with a small indigenous exporting sector, could rely on the FDI sector to develop a research base.

The big FDI and indigenous exporters do not do a material amount of patentable research in Ireland.

In 2004, an analysis of the profile of Irish-based companies engaged in patenting showed that none of the top 50 exporters were among the top ten foreign-owned patenting companies, and leading computer manufacturers were entirely absent. Only one of the top 15 pharmaceutical exporters (Abbott) appeared on the list.

Current European Patent Office data shows that the situation hasn’t changed.

It appears Mr. Cook gave a magnificent performance before the US Senate committee yesterday.
The danger for us though is contained in the following..
“According to one study cited by Mr. Levin, 30 of the largest American multinationals, with more than $160 billion in profits, “paid nothing in federal income taxes over a recent three-year period. Zero.”

Corporate tax loopholes, Mr. Levin said, need to be closed “whether or not we reform the overall tax code.”
http://www.nytimes.com/2013/05/22/technology/ceo-denies-that-apple-is-avoiding-taxes.html?hpw&_r=0

@ Seamus Coffey

I should add that of course the Government would deny that special rates were available as otherwise it would be in trouble with the European Commission.

What is clear is that Apple’s CFO and head of tax have no issue with the statements in the report as they both appeared at yesterday’s hearings on Capitol Hill and they did not object to the statements.

So it is reasonable to assume that Apple has what it perceives as a written commitment to keep the tax liability below 2%.

These individuals felt compelled to disclose this information in fear of being held in contempt of Congress.

@seamus,tks explains it ..
@DOCM-would a special deal be a contravention of any EU rules!!!!

great piece here………on progressie sorry regressieve taxation..

“Apple’s exact arrangements in Ireland have changed over the years.
Up until 2004 or later, the three Apple companies were assessed for taxation in Ireland, although the declared profits were much lower then.
In 2004, ASI declared a profit of $325 million and paid Irish tax of $21 million, its accounts from the time show.
In 2011, according to the subcommittee’s report, ASI earned $22 billion and paid just $10 million in “global taxes”.
http://www.reuters.com/article/2013/05/21/us-apple-tax-loophole-idUSBRE94K0MH20130521

Regarding any deal….oh we lost those documents…sorry…
“The company told investigators that it lost all records concerning why Apple Operations International was originally set up in 1980, and why all of Apple global sales go through it. You might have a few ideas why if you keep reading.”
http://qz.com/86740/the-seven-craziest-findings-in-the-us-investigation-of-apples-tax-avoidance-practices/

Seamus
your doing a great job but…
you say “Apple didn’t claim to have negotiated a 2% corporate tax rate”

Versus
“Apple told the Subcommittee that it had obtained this special rate through negotiations with the Irish government..
Since the early 1990’s, the Government of Ireland has calculated Apple’s taxable
income in such a way as to produce an effective rate in the low single digits …. The rate has varied from year to year, but since 2003 has been 2% or less.”

http://www.ft.com/intl/cms/ab635df2-c18c-11e2-b93b-00144feab7de.pdf p20

So, THEY state negotiation. Not a senator stating in a question. They state it.
Now, as I mentioned earlier this can be by overt rate change or by item by item deductibility etc. The effect of the latter is the same as the former in this case. So, lets cut the pretence here ; lobbying and negotiation secured a deal. To state otherwise is to engage in doublethink duckspeak.
Eastasia has always been at war with Oceania.

@ brian,

I have no doubt the the MNCs lobby the Irish government. They have a responsibility to their shareholders to do so. I am merely stating that no where do Apple say that something like the following happens

Taxable Income * 0.02 = Tax Due

Now it is clear that something along the lines of

Taxable Income * 0.125 = .02 Gross Profit

Where the percentage of gross profit paid in tax has been even less than 2% of gross profit. The differences between Gross Profit and Taxable Income are fairly well understood. And of course changes in the calculation of taxable income or in the tax rate applied can have the exact same effect on the bottom line so really it doesn’t matter which one is changed.

However, Apple make clear that the changes introduced in Ireland were for the calculation of Taxable Income rather than a “special rate” as suggested by the US Senators. Apple said:

Since the early 1990’s, the Government of Ireland has calculated Apple’s taxable income in such a way as to produce an effective rate in the low single digits, and this is the primary factor that contributed to Apple’s rate. The rate has varied from year to year, but since 2003 has been 2% or less.

The first line you quote is what the Levin/McCain report said Apple said. The quote here is what Apple actually said. I see nothing in that to suggest a “special” deal for Apple. Apple may have lobbied for it. They probably did. But if the calculation of taxable income changed for one company it only changed because it changed for all companies. There is nothing special or unique about it. We could have a debate about whether or not this change to the calculation of taxable income should have been introduced to the Irish tax code but again we’re not having that discussion.

If you have a quote where Apple say they negotiated a special 2% corporation tax rate with the Irish government that applies just to them it would clear up a lot of confusion.

@ brian,

This excellent piece from Tom Bergin of Reuters was linked above:

While the Senate subcommittee referred to Apple negotiating tax rates of below 2 percent, Ireland usually facilitates low tax payments not by undercutting its headline corporate tax rate of 12.5 percent but by allowing companies to declare low taxable profits – often by making deductions for payments to tax-exempt affiliates, usually offshore.

Ditto Eoin. Note my earlier comments back up in the thirties. This looks like a special rate, it calculates like a special rate, it is clearly therefore a …?

@fergaloah
“Luxembourg was being used as a billing location as it had the lowest VAT rate in the EU and VAT was based on the rate at Point of Sale but that is changing from 2015 when the rate applied should be based on the rate applicable to the location of the purchaser.”
That’s news to me given I pay 23% on my purchases from Amazon and indeed from any large retailer with significant trade into Ireland… I thought the rules on this had changed some years ago?

@ Seamas

I agree with Brian Lucey above. This appears to be a quibble.

It would seem to me to be entirely possible that the Revenue Commissioners could have agreed with Apple that certain transactions could be used to reduce their taxable income. It may even be the case that the Revenue applied a slightly more flexible approach than it otherwise would have (I understand the Revenue does have some discretion in these matters like the Gardai with penalty points) with another company.

I am, of course, open to correction.

There will unlikely be any further clarity on the rates issue and the politicians will stick to the line that there are no special rates.

They are not saying there are no special deals agreed on an individual company basis.

So there are many ways to skin a cat.

In the past, there used be Section 84 loans and other incentives available to the chosen.

The official agreed line appears to be to keep harping on the rate and try and avoid the issue of massive revenue diversions and the booking of them as exports.

Kenny

it is very clear, it is very transparent and we do not do special deals with individual companies in regard to that tax rate.

Kenny said that the OECD was about to issue a report on transparency in multi-national taxation and that “Ireland has been to the forefront of this …. one of the front runners in building a new international consensus regarding transparency on tax issues.”
???

O’Leary of the IDA

Ireland isn’t a tax haven

“There are many countries that have good tax offerings, including individual states in the United States and countries like Luxembourg, Belgium, Holland and the UK increasingly.

Bruton

Minister Bruton said that all companies brought to Ireland by the IDA contributed significantly to Ireland’s economy.

Mr Bruton said a low-tax rate was always part of Ireland’s “offering” to international companies and it would continue to be so.

Wow. I mean, just Wow. The US senate really hit a nerve with this one. If only there was this much rancour and debate about austerity eh?

@ Eoin Bond,

“a regime that makes interpretations of rulings is somewhat different to one that just decides whatever rate it wants for each individual company. It would be the difference between a very accomodative and nuanced corporate tax policy and a tax haven regime that literally just makes it up as and when and for whomever it wants.”

A distinction without a difference.

And, more importantly, the US, UK, France and Germany are inclined to agree.

@ Eoin Bond

“they’ve realised that both corporates and other economies have gotten quite good at fully utilising those laws for their own economic purposes, and large US corporates have become rich enough that the cash never actually needs to come back onshore and be used in the US economy. It either sits in the Caribeaan, or is used to invest in foreign economies far from US shores.”

In things like Bonds of Anglo Irish Bank which when the sh1t hits, can not be treated in the same was as a normal company because those who own the bonds are not the type of people you can hit.

Look, the evidence from the United States is stark. The types of practices are leading the economy of the US to an extreemly unequal society.
The 1% and all the articles Joe Stiglitz has written.

But we are following the US down this same road and people like you and FG are pushing us down it as fast as possible.
It ends badly for everyone except the 1%
With one exception. We wont have our own 1%. It will be the guys in the US.
If Apple paid 12.5% of their profits from all non US activity in Ireland, Ireland would be hugely better off It wouldnt be fair to China and Europe and the rest but that is not whats happening.

We are enabling them to become way more powerful due to the tax avoidance measures we allow them have, so obviously every time they come back to deal with us or any other Government they are stronger and stronger and keep demanding better and better terms.

What is happening is no less than an erosion of our (not just Ireland’s) democracy.

@ Chris

if the US et al are inclined to agree, then they will simply close their own legal loopholes. They wont need our help or support. My guess is that they dont close that loophole.

@ Eamon

i actually dont disagree. I think its insane that large corporates pay so little in corporation tax, particularly at a time when all else in society is being asked to suffer austerity. But for God’s sake, get the sequence of events and facilitators in the correct order – its a US legal loophole that allows this in the first place, not an Irish one. We’re simply jumping on their bandwagon, as they seemed to intend us to do by virtue of their being a loophole in the first place….(or else why else have it?)

How does one easily close the legal loopholes that companies are currently using to transfer profits to Ireland and then onwards?

It is a serious question so if there is an answer it’d be very enlightening if an answer would be provided.

@ paul quigley

WE in Germany, and in the northern countries, and our eastern neighbors are NOT denuded of political and social capital, quite the opposite

@Tull
It would be too cramped on an oil rig…they could buy one of the greek islands with all that dosh they hold offshore and set up their own independent Republic of Apple.

Fiat,
Won’t be crowded when company has no staff. But your idea has merit.
This practise could be stamped our by the US Congress by closing loopholes & lowering the CT rate. Then all the money would reappear onshore. There would be a collapse in hourly rates in Dublin legal circles & the salaries of hyper Uni Profs would have to be cut. All very regrettable.

@ John Gallaher

In answer to your question I can do no better than to “lift” this reply by Seamus Coffey to a question on his blog.

“Thanks Seamus. Do you think the Irish tax regime is sustainable? And if not, what then?

Reply
Replies

Seamus CoffeyWednesday, May 22, 2013
Hi Patrick,

Nothing lasts forever. But in saying that I do not expect significant changes for a decade or more. The US may try to make it easier for their companies to repatriate global profits but even with recent noises from the Senate I cannot see that happening before the end of the current administration.

The US doesn’t really want to change the low- or no-tax outcomes that the tax arbitrage strategies of companies like Apple achieve. They want to maintain that but find some way of encouraging/forcing the repatriation of the profits so the 35% US corporate tax rate can be levied.

At present the companies are (indefinitely) deferring this by keeping the money offshore – though I do question the legitimacy of Apple claiming their holding companies are tax resident nowhere. Something could be done to tighten up on that quickly.

When people talk of Apple using this scheme to avoid €X billion of tax it should be noted that it is US tax that is being referred to and that the tax liability is being deferred rather than avoided. Apple has a massive deferred tax liability with the US. There is no way of avoiding that on their global profits. What they are avoiding is paying by keeping the money offshore.

It is the US tax code that allows this deferral but even if this “same country exception” for what is known as Subpart F income (passive income such as patent royalties) is removed it is hard to know what the implications will be for Ireland?

Will companies still want to route their global profits to no-tax environments such as Bermuda and the Cayman Islands? Possibly. It may make low-tax countries with some substance more attractive for their international facilities, then again the consequence could be that they would favour moving their international facilities to high-tax countries. It really is impossible to tell.

There is no doubt there are significant risks/threats and I’m sure the Dept. of Finance will be watching the US Treasury for any hint of changes coming down the track. For the moment no substantive policy proposals have been made. The Senate hearing might shake something out but it is still likely that it will be years before anything significant comes about.”

The key element from an EU point of view is in another reply by Seamus above; that there has been no discrimination between Apple or any other company. Countries in the EU are free to administer their direct taxes in the manner in which they see fit but without breaching the competition rules of the EU. Contrary to what Michael Hennigan seems to think from his blog post above, they are not free to do what they like without prior approval of the European Commission which is the anti-trust authority (Justice Department) of the EU. It has very big teeth as it is in the interest of all the parties that it should have a sharp set of gnashers.

To pick up further on the reply by Seamus, and to misquote Calvin Coolidge, “the business of America is business”.

http://www.thisdayinquotes.com/2010/01/business-of-america-is-business.html

I am not so sure about the time-line suggested by Seamus. Big changes occur suddenly (as Professor John Fitzgerald remarked today, in somewhat apocalyptic terms, of the possibility of a decision by Congress closing down 150,000 jobs in Ireland).

Coincidentally, RTE is running a series on the “Big House” and its role as the local centre of both employment and industry during the era of the Ascendancy. American MNCs seem to have taken over the role (except for the fact that they are more transitory).

On the fundamental point advanced by many on this blog, even those on opposing sides, he is correct; our dependency on mobile FDI is excessive and a sword of Damocles.

@Tull
Closing loopholes may work but the problem seems to be more complex…
CNBC reporting tonight the Microsoft are to take on thousands of workers in China….patriotic? So much for bringing jobs back home to the US. Chinese might get a bigger tax take.

not so quick on losing the PR battle:

http://www.ft.com/intl/cms/s/0/3bacfa14-c20d-11e2-8992-00144feab7de.html#axzz2U3K9MYbc

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/3bacfa14-c20d-11e2-8992-00144feab7de.html#ixzz2U3KzkhVn

“The report is likely to put Ireland under the spotlight just when the OECD is focusing on profit shifting and base erosion, and Europe is again muttering about unfair competition. But to be fair, there is no evidence that Ireland struck preferential deals with Apple. Nor is there anything to suggest that Apple has acted illegally, as Tim Cook, chief executive, told the committee on Tuesday. Much of the avoidance cited is routinely used by US multinationals, thanks to a tax code which invites this through differing treatment of foreign and domestic earnings. At the last count, US companies held $1.7tn in unremitted profits.

Rather than bash companies and foreign countries, the Apple example should encourage Congress to move on corporate tax reform. “

@DOCM one the more surprising findings in the report was where exactly offshore is….for me its around the corner…
“Apple’s $102 billion in offshore profits is actually managed by one of its wholly owned subsidiaries in Reno, Nev., according to the Senate report on the company’s tax avoidance. The money is tracked by Apple company bookkeepers in Austin, Tex. What’s more, the funds are held in bank accounts in New York.”

http://www.nytimes.com/2013/05/22/business/for-us-companies-money-offshore-means-manhattan.html?hp&_r=1&

Dr Sheila Killian did an excellent report-cheat sheet/cliff notes here-report linked-a little dated but..
“Driving the Getaway Car is a timely and useful contribution to an urgently needed debate. The new Irish government faces tough choices on tax policies. The current situation is unsustainable and a new development strategy is urgently required. They can either opt for further tax competition, which we would argue is harmful to the interests of other countries and ultimately self-defeating (see Sheila Killian’s article in Tax Justice Focus here), or they can strike out in a direction that reduces harmful impacts on other countries and contributes to strengthening internal fiscal sustainability.

As Killian argues in this report, the current tax policy mix is not coherent with existing commitments to avoid causing harm to other countries. Change is necessary, but does the current government have the appetite to take on the vested corporate interests who find the current corporate tax regime, with all its gaps and loopholes, very much to their liking?”
http://taxjustice.blogspot.com/2011/03/driving-getaway-car-ireland-tax-and.html

🙂

@ john gallaher

Talk about looking through the wrong end of the telescope! Ireland is not in a position to ride a tricycle, not to mind drive a getaway car. The heist is being organised by a much bigger player; corporate America.

This is what the collected wisdom of the Heads of State and Government of the EU has come up with!

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/137199.pdf

@DOCM

Notice the careful use of “tax evasion” as not being Kosher while carefully avoiding “tax avoidance” which is the cancer afflicting tax revenues.

Apple admitted “tax avoidance” while emphasising it is legal. Apple also invited the Senators to consult it when changing the tax code. This means there will be some tinkering with the US tax code. They are looking at Canada which has corporate tax of 15%-20% with fewer exemptions.

@DOCM some yank stuff…off to a barstool…but here is some insight on the recent apple bashing..check out the chart.
http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-14
http://currencyofideas.tumblr.com/post/51032784874/apple-bashing-as-political-sport-modernize-the

@francis like the parrot…..
http://www.dailymotion.com/video/xoh8j_monty-python-dead-parrot-sketch_news#.UZ1Vdcu9KSM

@Paul Quigley

We had a thriving Poteen production business in Kerry, killed dead by the Tiger. Now it is coming in from as far away as Sligo. I am sure there are many house plants that would be thrown out if the woman of the house knew what they were. We are not capable of organising competitive grow ops. A good source of revenue for the Gov’t would be legalised grass (production and sale) and just regular common garden VAT. A far more stable business than the Dublin Financial District. More palatable than property taxes.

@ MH: Hey up!

“We are not capable of organising competitive grow ops. ”

We could, but the pecuniary return is somewhat low. Better to plunder folk’s wallets – “We KNOW your MPRN, we do!”

“A good source of revenue for the Gov’t would be legalised grass (production and sale) and just regular common garden VAT.”

Yes and no. Just regulate it – like alcohol and tobacco. Simple. The legislation is already tried and tested. Small revenue potential though.

The really big saving would be reduction in Garda, Court and prison resources (and the politically encouraged, criminal drug monopolies, of no fixed MPRN, should suffer some revenue decline as well). Regulation likely? No! Too many vested folk. We would need a Croagh Patrick Agreement for that!

On a lighter note. Why do we need taxes in the first place? Oh yeah! No taxes, no urbanized society! Maybe Dev was correct. We need to back to rural crossroads! That should solve it.

Or maybe its this:-

“I have a funny feeling that there’s a necessity driving this (hinky tax stuff) that no-one quite understands and it is this: “honest business” doesn’t pay enough to keep the system expanding at the required rate to make the debt load at least appear sustainable.”
[anon blogger: iTulip.com: 30-04-2010]

From an Opinion piece in the NY Times:

“Question for the government of Ireland: Do you really want your country to be known as an offshore tax haven? Indeed, at a time when your citizens are dealing with the pain of an austerity program, how can you justify allowing Apple to pay virtually no taxes on a subsidiary established solely to avoid taxes in the United States? Just wondering.”

Article here: http://wap.nytimes.com/2013/05/23/opinion/nocera-here-comes-the-sun.html

OK francis…no more jokes 🙂

http://www.mpettis.com/2013/05/21/excess-german-savings-not-thrift-caused-the-european-crisis/

@ Flj

A very interesting link, especially the last Q & A.

“After the EU summit last June, Greece and other countries under adjustment programs, like Ireland, started hoping that the ESM would be able to recapitalize their banks directly. It’s not really clear yet what this means as each eurozone nation is giving its own interpretation of the decision. For example, Greece has borrowed 50 billion euros from the EFSF to recapitalize its banks. Will it ever be able to write this money off its public debt books?

We are working very hard on all the elements of the banking union. As you know, we have already agreed on the Single Supervisory Mechanism and the Capital Requirements Directive. Our current work focuses on two elements, one is the Resolution Directive, which gives us a harmonized framework to deal with banks in trouble, and the second one is direct bank recapitalization. Now whether direct recap will be accessible also to countries which are already under programs and have recapitalized their banks is yet to be decided. So I can’t answer that. We are trying to reach an agreement before the summer, but of course there are no guarantees. There are still elements to be discussed. I think it’s crucial to have the public backstop from the ESM in order to help countries facing problems. The conditions for that are now being discussed. Hopefully, we will have more clarity on that before the summer.”

The earlier agreement reached in the stand-off between Paris and Berlin – the key protagonists – was, it seems, that the conditions surrounding such re-caps would be put in place according to the June deadline, the actual implementation, whatever it includes, being dependent on the other pre-requisites set out by Germany; essentially all the elements in banking union being agreed.

Keeping to the time-table poses an interesting tactical political question for Merkel. Guy Verhofstadt is not impressed and evidently has concerns as to how it will be tackled.

http://www.ft.com/intl/cms/s/0/23d518d2-befb-11e2-87ff-00144feab7de.html#axzz2U7XoP8gP

@ BrianH

Is not the substantive question, allowing Apple “to pay virtually no taxes”, or rather more accurately to keep the profits subject to US tax in limbo technically nowhere abroad, more properly addressed to the US government?

@francis,Ireland may be out of step on this one,some recent int. developments and a free book…no not lunch!
http://www.publicintegrity.org/2013/05/22/12479/release-offshore-records-draws-worldwide-response
https://icij-uploads.s3.amazonaws.com/Secrecy-for-Sale.pdf

Vinny if you are going to criticize the least you could do is be a little less lazy and read through some of the posts before you make bold incorrect statements.

Most of the debate in the comments has been around your first three and last points.

@ vinny: “Not much interest by any posters on this site …”

Yep! The so-called austerity consolidation programmes are a complete load of economic b****x. But sure, which local econ is saying this?

The hinky tax stuff is due to the ‘need’ for multi-nationals to use the untaxed revenues for financial investment (aka: derivative gambling and commodity trading). This gives a good return – until it does not! So its a no-brainer if they do no buy-off the local legislators to do their bidding. And lots of folk are going, “Oh my God!”. Its pathetic.

Expect little reform, change or whatever. Though some marginal reforms are happening. Things have to get a great deal worse: then maybe.

Francis cleaning lady …is she a swabian housewife?
Rest seems..disconnected self justificstii with more thab a soupcon of moral superiority and a dssh of “nobody loves us”…

Brian perhaps the only way to really understand the subtleties of the German perspective is by living there.
In my observation any ‘moral superiority’ rank and file Germans may feel about the long terms sustainability of their country and its way of life (particularly compared with proto-Americans like the Irish) is well-founded and entirely justified.
Germany is an ordered society with more constraints on how its citizens behave and use common resources than is found in UK/Ireland notably. Citizens are expected to behave like adults and there is less prudery than in recovering theocracies like Ireland. The upside of these attitudes and shared values is generally high levels of trust, in ones community, state and federal agencies and the quality of the services they provide, and in the contracting of business with German people and companies. It is this stability and trust that enables infrastructure to get built and small companies to grow and evolve. It contrasts with the US/Irish ‘quick buck’ mentality and political/legal/tax/financial shifting sands which make long term investments in Ireland that bit riskier and less likely.

@eamonn Moran- not sure about ‘most’ comments but I admit to missing some- ‘rant mode’ took over!
@Brian Woods Snr.- re ‘no or little reform’ – agreed and it’s all too predictable –

@DOCM looking forward to saturdays game:)
http://www.nytimes.com/2012/12/26/sports/soccer/as-europe-struggles-germany-invests-heavily-in-soccer.html?pagewanted=all&_r=0

@ John Gallaher

How could the NYT miss this?

http://www.independent.co.uk/sport/football/european/champions-league-final-angela-merkel-turns-her-back-on-bayern-munichs-uli-hoeness-as-tax-row-clouds-wembley-showdown-8622409.html

The truth of the matter with regard to the exchanges regarding Germany is that it is normal Western democracy with all the virtues and vices of same. The remarkable thing, it seems to me, is that Germans themselves seem hesitant with regard to accepting this, putting their trust in institutions, two in particular – the Bundesbank and the Constitutional Court – rather than their politicians. The jury is out with regard to their sportsmen. But that is true everywhere, I guess.

@DOCM tks that was great read,fun link…this has been widely reported,apols off topic but you may enjoy it!
http://www.ibec.ie/IBEC/Press/PressPublicationsdoclib3.nsf/vPages/Newsroom~david-miliband's-ibec-accenture-annual-lecture-22-05-2013?OpenDocument?OpenDocument

Interesting article, including the video clip.

http://ataxingmatter.blogs.com/tax/2013/05/rand-paul-demands-an-apology-for-congress-looking-at-quasi-sovereign-mnes-tax-avoidance-gimmicks-.html

Is Kenny telling the truth or is Cook lieing.

http://www.faz.net/aktuell/wirtschaft/europas-schuldenkrise/gipfel-in-bruessel-luxemburg-bremst-eu-im-kampf-gegen-steuerfluch

“These are our conditions. Accepts it or not. ”
Indirectly, the tax savings of the American company Apple were discussed in Brussels. The company is alleged to avoid higher taxes in the United States about Irish subsidiaries. French President Francois Hollande said the EU would not allow a Member State would permit companies to shift capital from purely fiscal motives. The Irish Prime Minister Enda Kenny denied, however, that there are exceptions for international companies: “We do not make special arrangements with individual companies.”t-12191543.html

Tony
Im in Slovenia. At lunch yesterday with some academics and business folk the issue of germanophilia came up. The concensus was that Germany had vastly overplayed its cards and that those advocating we (whomever de jure we are) must become more Germany should go live there coz rhe germans seemedimperviousto the notion of bilateral movement. In other words they would become more german if they felt there was the remotest hope our teutonic friends would become more slovene.
Hard to disagree no?

@Brian
“…Germany had vastly overplayed its cards and that those advocating we (whomever de jure we are) must become more Germany should go live there…”

Been there done that. My family divides its time between Germany and Ireland – best of both environments. Note too that once again some of our departing countrymen are emigrating there, voluntarily or involuntarily, with/without German language skills.

Germany has a functioning and healthy economy, by design. Many EU states no longer do, including our own and the UK. I know very little about Slovenia’s situation regretfully.
Germany’s superior sustainability is instantly apparent in its built environment, particularly when compared with many Anglo countries. This reflects the national business model and the way its various social systems operate.

Ireland has had a wake-up shot across the bows this week concerning the sustainability of its own national business model. Changes to the international tax environment will make the prevailing FDI-based BM less attractive, and tax revenues from the FDI business services sector powerhouses lined up along Dublin’s riverfront will begin to falter. It is now in a race to create economic ‘substance’ to underpin the misleading claims that many of its analysts and researchers have made concerning its economic and financial performance, before the wheels come off the cart.

Some citizens are trying hard to build indigenous business but discovering how tough indigenous organic growth is, in the Irish environment, still configured as it is towards rewarding the old FDI-based BM. Very simply, Ireland has to choose between Boston and Berlin. It can either be an EU-based Puerto Rico or it can take a leaf out of Germany’s book, face down its ‘Bostonians’ and develop a fit for purpose enterprise strategy. Germany has little to learn about building a sustainable future from the Irish. On the contrary we have a huge amount to learn from Germany.

@DOCM

What needs to be done to restore sustainability in Ireland is very hard and despite its economic/political history fundamental change is needed. The prevailing BM is broken – we lost control of its operation somewhere along the way and for at least the last decade the FDI tail has wagged the Irish dog. The alternative to building a new business models is depression, socio-economic apartheid and Puerto Rico.

There is no point in nursing expectations of even-handed treatment given the prevailing beggar-thy-neighbour BM. Ongoing negative PR about this will make it a political issue at EU level. For enforcing performance of EZ obligations there is the ECJ and we should use it.

@ Tony Owens

I agree that the PR battle is lost. But that aspect is not the decisive one.

I referred deliberately to “agreed obligations”. These do not include any requirement to harmonize arrangements at an EU level in matters dealing with direct taxation. This is the gap through which all member states, Germany included, are driving a coach and four. If they want to change the situation, let them do so by all means (by changing the treaties or agreeing ex-treaty arrangements). But “inviting” Ireland to act alone is not on. This why I also deliberately referred to all acting in an “even-handed” way.

The IT coverage is very good today and clarifies quite a few issues. What remains to be further clarified is the distinction between individual and company taxation. There is definitely a near agreement on the “automatic” exchange of information with regard to the first, provided some other non-EU countries also participate, notably Switzerland (on the insistence of Luxembourg which is not about to commit national hari kiri just to see German tax dodgers shift their money to Geneva). On the second, I think the aspect covered in the Dealbook extract above is the decisive one.

The nature of international trade flows, and the location of associated profits, is dramatically different to what it was even in the 60s. I used on another thread the billiard table analogy for the classic macro-economic view of billiard balls (countries) interacting with one another according to a predictable set of rules. It is outdated.

@ Flj

I had posted the above before I read your comment but it makes exactly the same point. Cyprus set a very bad example. That the percentage the country was forced to accept is the current Irish corporation tax rate is hardly accidental.

However, the individual tax dodger is much easier to target and I think that it is only on this front that we will see early movement.

By the way; why should companies pay any taxation? All their inputs, and their employees, are already subject to taxation. The “excessive” profits flow from added value of the intellectual property involved in the case of Apple and Microsoft. (I had better not go there!).

@ Tony Owens

The place to which I did not want to go was the iconoclastic idea that companies should not be required to pay any tax.

On the IP aspect, this is all news to me but it seems to confirm the wisdom of Apple and other companies in retaining a large war chest overseas to ensure that they remain competitive.

As I see it Ireland made great progress from 1973 to 2007. We pursued the “main chance” with vigour and intelligence. This led to narrowing options as prosperity increased, eventually we were left with a two trick pony namely low corporate taxes and a property boom. The property boom went bust and now we are left with low property taxes as low as 2% if we believe Tim Cooks Senate testimony. Since Cook was under oath in the most litigious country on earth it is highly likely he was telling the truth.

Now it appears increasingly likely that our one trick pony is for the abattoir.

We differ from Germans most markedly in our ideas of what is right and what is wrong. In Ireland right and wrong consist of a range of grey shades that expand and contract to fit the immediate situation. In Germany right is right and wrong is wrong and never will two meet never mind overlap.

Our corporate tax policy to most Germans looks lazy, simple minded, unfair and doomed to failure for the simple reason that any idiot can implement low/no tax policies. The Germans have created more options for themselves and are not forced to shortsightedly and desperately grasp for straws. One could say that German manufacturing is causing the country to be overexposed to competition worldwide. Germans are acutely aware of this and know that their Gov’t has to act responsibly particularly wrt Gov’t debt. Most Germans are unhappy with a debt to GDP ratio over 80%.

It should be possible for the PIGS to get Germany to buy into a major public works program that will cause at least 3% inflation in the EZ. This will allow property to increase in price which in turn reduces risks for all EZ governments and particularly German Banks. Rogoff and others are promoting this as the gentle way out with austerity likened to giving castor oil and senna leaves to a person with diarrhea. German workers would welcome the portion of inflation that could flow to them.

Our political culture which reflects what people vote for is crippling us. This too will change. Reality is for people who cannot face up to alcohol.

@ Seamus Coffey

Ireland is not a tax haven.

Finfacts v Irish Status Quo: Corporate tax and property bubble taboos

http://www.finfacts.ie/irishfinancenews/article_1026037.shtml

@francis

The kind of public works that deal with the most basic needs and stand up to public scrutiny.

Speaking of Ireland the public transit systems are a disgrace compared to what one sees in Germany and neighbouring countries. There are widespread water quality (this in a country with high rainfall) and sewage isues. Teaching of second languages instead of wasting tens of millions every year on a dead but not yet interred language. This would require importing people who know how to teach a second language and the sending of Irish people abroad to learn how to teach a second language. A boost for European unity the biggest since hundreds of Irish signed up with Napoleon the descendants of whom rose to the French Presidency. From this would follow more Irish students in European universities leading to a greater understanding of Europe in Ireland and of Ireland in Europe.

My opinions are coloured by my experiences with Germans and Greeks at close quarters over years all of which I found to be beneficial both personally and in a business sense. We can all make progress and I believe the will exists.

@ Michael H

+1

Remorseless denial, and at length, on RTE lunchtime radio. Everybody’s brother, cousin,son, lover, neighbour, colleague, drinking buddy, sports affiliate, is getting a slice of the tax avoidance pie. Everyone who matters that is. The fact that our entire establishment is defending the indefensible says a lot about the degree to which the suits have captured our state 🙁

@ francis

To the specifics, and in the absence of any response from an economist (apart from Brian Lucey’s not inaccurate jibe about the Schwab Hausfrau : )

You have a lot of numbers, but you may not be up to speed on financial economics or macroeconomics. This is Pettis’ central point, which you haven’t really acknowledged or addressed:

‘
In an open economy, in other words, a country’s total savings matters because to the extent that it exceeds investment, it must be exported, and it must result in a current account surplus. Here is where the confusion so many analysts, including economists, have about the difference between national and household savings. Household savings represent the amount out of household income that a household chooses not to consume, and so can be affected by cultural or demographic factors, the existence and credibility of a social safety net, the sophistication of consumer finance, and so on.

The national savings rate, on the other hand, includes not just household savings but also the savings of governments and businesses. It is defined simply as a country’s GDP less its total consumption. While the household savings rate may be determined primarily by the cultural and demographic preferences of ordinary households, the national savings rate is not. Indeed in some cases the household share of all the goods and services a country produces, which is primarily a function of policies and economic institutions, is the main factor affecting the national savings rate’

This is not about blame, or national character/culture, or political governance, it’s a strictly technical matter, and it’s about understanding financial dynamics and flows. Ever since Keynes, we have understood that money is not just a veil over real economic activity. In many ways, maybe, it is more real than the real economy, probably because it is channel for the transmission of power.

Social relations are grounded in various forms of hard or soft power. You are living in a place where a whole range of theories around economics and power were reflected in hard practice. I refer, for example, to Marx’s Kapital, Lenin’s vanguardism, Stalin’s base and superstructure, or Gramsci’s notion of hegemony.

It’s hard to believe how much struggle, destruction and chaos occurs in the world, unless one is directly exposed to it. Organised religion is not longer at the centre of western society, but it still play a big part in global events. Ideologues pile up plenty of corpses, but they are not always wrong about everything.
Power lies mainly with banks and MNC today. Arrighi’s Long Twentieth Century is the best, IMHO, overall synthesis of what the modern MNC represents, and how it fits into world history, especially the history of the declining US. David Stockman’s ‘Great Defomation’ is a lengthy but gripping analysis of the way the state has been captured by financial market interests.

The MNCs are liable to be captured too, when the accountants find a way to ‘virtual patent’ all that IP. A bit like putting a meter on the sun. St Augustine said money was the root of all evil, because interest payments took precedence over Christian duty, but the Church made its peace with business after a while 🙂

We had an Irish version of the Swabian Housewife back in the early day of the state. One of our first finance ministers, Joe Brennan, I think, took a pride in reducing income tax below the British level. Needless to say there was little public investment and massive emigration, hence the rise of the Fianna Fail alternative in the late 1930s.

Your version sounds a lot more democratic, and a dose of responsible government can do us no harm. One of our big problems, though, is the traditionally weak powers of our city and local authorities. The current adjustment is making this problem worse, and alienating the citizens further. Fiscal adjustment without political reform cannot work.

Irrespective of how well governed any city or nation is, there are processes, like finance, economics or environmental issues, which transcend national boundaries. One way or another, the German problem is the Irish problem and vice versa. So back to Pettis for the big picture.

http://www.amazon.com/dp/0691158681/ref=as_li_tf_til?tag=chinfinamark-20&camp=14573&creative=327641&linkCode=as1&creativeASIN=0691158681&adid=1BM492HM6CMTC50ZBA5J&&ref-refURL=http%3A%2F%2Fwww.mpettis.com%2F

@ paul quigley

A late night ahead to support Germany in the Champions League final!

Meanwhile, Chris van Egeraat of NUI Maynooth has sent me the following linK:

ANALYSIS-Low-carat gold at Irish end of US corporate rainbow

http://www.cnbc.com/id/100765321

[At a conference in Dublin on Friday the head of Ireland’s largest bank gave small business leaders the “15-second elevator pitch” he gives to U.S. executives when he is in New York or Boston.

“I’ve mentioned to U.S. investors that U.S. companies have more capital invested in Ireland than they do in Brazil, Russia, India and China put together,” said Richie Boucher, chief executive of Bank of Ireland.

“We have had a record year of FDI (foreign direct investment) in 2012.”

The numbers are eye-catching. About $30 billion of net FDI flowed in to Ireland from the United States in 2011, the last year data is available. That is double the level at the peak of Ireland’s boom and the equivalent of 6,670 euros for every man, woman and child in the country.

And yet in the real economy, the number of jobs in foreign-owned firms fell by 9 percent, according to state enterprise board Forfas. Total employment fell even more – 15 percent.]

Lies, damn lies and statistics!

Richie Boucher quoted US Chamber of Commerce in Ireland ‘statistics’ – – the total for Irish inward investment flows includes retained earnings — ‘trapped cash’ in US bank accounts!!!!!!

It’s bullshit.

Maybe he should tell Wilbur Ross.

UNCTAD, the UN trade agency, says inflows in 2011 were at $13bn; outflows were at -2bn.

Total inward stock in 2011: $243bn; outward stock $324bn — the later is for that big market in fairytales.

@ Mickey,

the sister of one of my best friends was over to Dublin for many years. She came out of the real estate run slightly positive and is now with her Irish musician lover /husband(?) in Berlin.

My friends daughter, clever little girl, skipped one school year, comes over for studying to Dublin this summer.

There was actually a recent article, that we were one of the 3 most intensively cross breeding species here in Europe (minimum delta between “self” and “other” in Table one : – )
http://www.plosbiology.org/article/info%3Adoi%2F10.1371%2Fjournal.pbio.1001555

@ Paul Quigley

I understand the difference between privately prudent behavior and national / organization size problem, if everybody sits tight on his money very well. More to that complex tomorrow, probably.

And that the US with their nationalist mindset wiki/Smoot–Hawley_Tariff_Act in 1929/30 was one of the amplifiers (see Fig. 16.9 in Reinhart / Rogoff TTID), we are well aware.

These “national savings rate” calculations, somewhat like that de Grauwe recently, I am deeply skeptical about.

One of the reasons we have now the 4th version of our stability laws (first version in 1967 with some investment equalizing, blablablah), was that some states succeeded in redefining higher teacher wages as infrastructure investment. Classic case of Chutzpah : – )

Since the game has started, just one last point for today, some more comments to good points here tomorrow.

This apprenticeship stuff is good but not the holy grail, and it needs massive adaption to the local situations, just lording it over with an English translation of the german manuals will not work, at least not very well.

We only have strength in numbers, if we are all prosperous, depriving our neighbors of their intelligent and eager, this would produce terrible consequences.

Sheila darlin tis world leaders in soft drink syrup we are.

http://www.nytimes.com/2013/05/26/opinion/sunday/who-will-crack-the-code.html?hp

A snippet

“IRELAND and Singapore have no natural resources that make them obvious places to manufacture the concentrate used in soda, nor have they developed innovative new soda-making techniques. Yet they have nonetheless become global capitals for making soft-drink concentrate.
In Singapore, Coca-Cola recently opened a plant with the capacity to produce the underlying ingredient for 18 billion cans of soda a year. In Cork, Ireland, PepsiCo has located its “worldwide concentrate headquarters,” which until 2007 had been in New York. More than half of all PepsiCo soda sold around the world starts, as concentrate, in Ireland.”

@ Mickey Hickey

The only thing that is more bizarre about the soft-drink concentrate story is that billions – literally – of people, especially children, drink the resultant concoctions to the great detriment of their health.

DOCM

brought right in time the reminder that this about corporate tax, and in Ireland.

When I read the piece of Colm, I say, whatever he smoked, I want some from too. But it is not business, it will be the UK and US, who will push you on that.

@ Brian

my brain drain comment was more with other countries in mind, because that was one the next things I wanted to say, that there are many other countries in Europe, I actually worry a lot more about than Ireland. The 10 year rates, as you can find them in a nice overview at The Economist , Market data, actually reflect the extend of my relative concerns, especially that a number of countries are not on the list.

The last thing I wanted to say is that if baffles me on a routine basis, what people are dishing out what advice to us. The BoE Mark Carney came with proposals for harmonization of unemployment insurance in the EuroArea this week. And the EU commission lectures Germany on urgent efficiency improvements : -)

‘If it was possible to expand manufacturing employment by 70,000 through the period up to 2001, it is possible to do so again.’
Hmmm….

Colm has been around a long time, so we’ll let him draw the long bow.
The important bit is that he acknowledges that Ireland’s business model is clapped out. You would never guess that from the rah rah which RTE has been pumping out all weekend. The IDA is even going to look at a taxpayer funded opinion wave reversal strategy. Canutenomics.

Colm also acknowledges the influence of corporate lobbyists on political parties. Plutocracy lives, and not just in the US. Rank hypocrisy and rank corruption too. Individual shareholders have little clout, and the CEOs in many cases control their boards.

There is a humungous principal/agent problem, as explored at length by Joe Stiglitz, in today’s corporations, but maybe that’s too deep for the Sindo readership.

It’s hard to tax MNCs, because they inhabit a global space, and have the upper hand over mere nation states. That’s what the market state means. Ref Philip Bobbit.

Colm also acknowledges Micheal H’s points about the bogus nature of much service exports. Let’s hear it for Mick. It’s a long road that has no turning.
The quoted 87-01 rise in Irish manufacturing employment needs more analysis.

What proportion of that was FDI sector ? Joining the euro blew up Irish domestic credit, and inflated the property bubble, but the MNCs never used Irish credit. There were two substantially, if not entirely, different dynamics involved.
I thought the decline in competitiveness was about a composition effect, with a much bigger proportion of less productive activities in construction. We don’t have much domestic high tech manufacturing, because the FDI activity didn’t really link domestically. There is no Irish Mittelstand :(

A thorny problem, as a certain Joe Lee recognised many moons ago. The possessors versus the performers. I listened to an interesting debate on Newstalk about Poynings Law. Déjà vu again.

Ireland’s confusing FDI data in age of spin

http://www.finfacts.ie/irishfinancenews/article_1026038.shtml

Well the above is certainly on “message”…..

“Ireland should take its hands out of other countries’ pockets. Ireland’s tax system is designed to tax income other people have earned,” Sven Giegold told Reuters, underscoring how emotive the issue will be in elections in his native Germany.”
http://www.reuters.com/article/2013/05/27/us-ireland-tax-idUSBRE94Q0D420130527

Hi francis,yeah the yanks want the money put to work after a bite naturally enough.The pr effort is rather lame,some letter on its way to the sentate committee…a letter !
But these salaries have to be paid somehow…tax haven so be it!
http://www.independent.ie/irish-news/ucd-tcd-professors-paid-more-than-those-at-worlds-top-colleges-29298324.html

@Francis here is the American comparison….the Meg Greene piece linked by SC is about as good as its going to get.
There is NO explanation none zero nada zilch for Apple having companies not subject to tax,defending it is pointless.But agreed the Irish are not going to change Lichenstien by the Liffey,the yanks will,there is significant cross party support over here.

http://www.insidehighered.com/news/2013/04/08/aaup-survey-finds-average-faculty-salary-increased-rate-inflation-last-year

@francis 2 b contd….ipso facto.

From Joe Stieglitz latest article.

“Why should taxpayers in Germany help bail out citizens in a country whose business model was based on tax avoidance and a race to the bottom – and why should citizens in any country allow their companies to take advantage of these predatory countries?”

Even though you could argue by taking on the debts held by German banks Ireland has actually done the opposite….

Still Ouch!!

http://www.guardian.co.uk/commentisfree/2013/may/27/globalisation-is-about-taxes-too

The national radio network RTE spills the truth in minute 41.

http://www.newstalk.ie/player/listen_back/24/1406/26th_May_2013_-_The_Sunday_Show_Part_1

http://www.levin.senate.gov/newsroom/press/release/levin-mccain-statement-on-letter-from-irish-ambassador-to-the-united-states
Levin, McCain Statement on Letter from Irish Ambassador to the United States
Friday, May 31, 2013