Facebook Finds Grass Greener In Ireland 287
theodp writes "Facebook announced it has chosen tax-haven Dublin for its international HQ, but not all are buying COO Sheryl Sandberg's line about local world-class talent being the motivation behind the move. The Irish Times recently reported that Irish subsidiaries owned by US multinationals are opting to convert to unlimited liability status, concealing the financial performance of their Irish operations from public view. They include Microsoft's incredibly profitable Irish subsidiaries Round Island One and Flat Island Company, Google Ireland Holdings, and a subsidiary of Apple Computer. The conversions have occurred as US tax authorities have increased their scrutiny of international mechanisms used by American multinationals to reduce their taxes at home."
Local world-class FINANCIAL talent (Score:3, Informative)
The "talent" in question is that able to secure local subsidies and bribe^Wincentivise the local politicians.
There's a reason Microsoft, Dell and so on have their European bases in Ireland.
Thankfully they aren't big on local talent for the Facebook movie. [today.com]
I think that the tax law changes started way back (Score:4, Informative)
I think that the tax law changes started way back in the Clinton administration. If I remember correctly that Congress passed legislation to make it very difficult for people to move to lower tax rate jurisdictions and keep their money and at the same time made it easy for corporations to do so. This process of giving more rights and flexibility to corporations than to individuals continued full speed ahead during W. Bush's term.
I don't think that there can be much doubt (especially after this corporate giveaway bailout being voted on today) that most governments (including mine, the USA) have been totally subverted to corporate interests. The question is, I think, given this environment, how can we as individuals thrive most effectively? I have been blogging a lot about this lately, but I won't bore anyone here with links to that :-)
Re:Avoiding US taxes by setting up overseas (Score:5, Informative)
Re:Avoiding US taxes by setting up overseas (Score:5, Informative)
Adam Smith was a Scot, not an Irishman.
Comment removed (Score:4, Informative)
Re:Avoiding US taxes by setting up overseas (Score:2, Informative)
hey its you guys that are such big fans of the free market, It turns out that they're free to move to Ireland. The lower taxes you get in return must also be great for America as its such a big fan of small government too.
Re:I seriously hope the next president stops this (Score:2, Informative)
They will need to end all these loopholes to pay down the insane deficit.
Ahh, Ireland is a more recent example of what's been going on since the 70's. One of the totally legal tax scams no one cares to mention is when an American subsidiary of a conglomerate operates at a perpetual loss. American management uses the "operating loss" excuse to keep wage low. Samsung, Panasonic, Sony, Acer, etc. They get to reap the rewards of participating in the most vibrant economy in the world for rock-bottom dollar.
The problem with tightening these rules is that the average international corporation pays tax consultants to figure out the lowest operating cost method. If the U.S. doesn't provide the lowest operating costs, then they just re-organize to different parts of the world. Those clever corporations would, for example, issue bonds under one corporation then use them to fund another subsidiary. The bond-issuing corporation "fails" bondholders and equity participants lose everything and the other subsidiary that got the money lives on. The finance world is using that scam right now to "fail" everything over to the Treasury.
It's the equivalent of tightening your grip with a palm full of sand. I don't know a good way to fix it that won't be gamed in a couple of months after the legislation goes into effect.
Re:the US tax code (Score:4, Informative)
Facebookâ(TM)s Dublin headquarters will house the social networking websiteâ(TM)s technical, sales and operations staff. The move is expected to create about 70 jobs and will not affect the websiteâ(TM)s existing London base, which is a commercial, rather than operational, office. Staff in Dublin will cover Europe, the Middle East and Africa, while the rest of the world is covered from Facebookâ(TM)s global headquarters in Palo Alto, California.
http://business.timesonline.co.uk/tol/business/industry_sectors/technology/article4870354.ece [timesonline.co.uk]
Re:They're not the only ones (Score:2, Informative)
Half of the UK's choosing to move their finances over to Ireland because the government (up until this afternoon) was only guaranteeing to protect up to £35,000 of savings should their bank collapse whereas Ireland will guarantee 100%...
It's not quite as simple as that, the government has increased the savings protection from €20,000 to €100,000 for the 6 wholly Irish owned banks. This happened only a few days ago, and it is planned to last for 2 years. The biggest influence is on the banks liabilities, i.e. all it's deposits, commercial, retail (you and me) etc. According to the bankers, and the central bank, the bank's problem is with liquidity, not solvency. This means the banks need to attract deposits so they have short term funding. It also means they can borrow cheaper, and the hope is that banks can starting giving loans to each other again.
The government here don't want any of our banks to crash like in the states, the economy is already in a recession with the crash in the housing market (which was the governments fault in the first place). If one of the banks were to become insolvent it would cause serious problems here (one out of the six banks might have been close to insolvency).
The risk taken on by the government is huge, our national debt is just under €40bn, and the six banks owe €440 billion (but have €520 billion in assets). It equates to ~ €100,000 being potentially spent per person in Ireland, compared to ~ $2,000 per person in the US.
While Sarkozy is trying to convince European governments to have a pan-EU rescue plan (especially the German gov who are against such a system), there is a possibility more banks may fail, and after the worst performance of Irish banks on the stock market in history (shares dropped by as much as 36% on Monday) it scared the government into action.
Admittedly, it's not very competition-friendly to look after only Irish-owned banks, but there are supposed to be some discussions with the UK, Dutch and Belgian owned banks operating in Ireland to equalise the playing-field.
On another note, it's about time governments moved in to shake up these parts of the banking sector, where there hasn't been enough regulation, and this last year has shown what happens when we let the mystical, magical "market forces" to run rampant, governments have to step in to fix other peoples mistakes.
Disclaimer: I am not a supporter of the current Irish government, a lot of the current economic problems can be directly attributed to their pumping of the property and construction sector, along with the usual dose of mis-management and wastage, but I do agree with their move to support the Irish banking system in part.
McCain called it? (Score:5, Informative)
Some of you may remember the Presidential debate only 6 days ago. As soon as I saw this story, I recalled McCain's argument for lowering business taxes. He used a very specific example...Ireland.
You can see the video here [google.com] with the Ireland remark highlighted.
I took the liberty of transcribing McCain's words. Not to go totally partisan up in here....but you gotta give him props for calling this one:
The business tax. Right now, United States of America business pays the second highest business taxes in the world, 35%. Ireland pays 11%. Now, if you're a business person, and you can locate any place in the world, then obviously if you go to the country where it's 11% tax versus 35, you'll be able to create jobs, increase your business, make more investment, etc. I want to cut that business tax. I want to cut it so that businesses remain in America and create jobs.
Re:OK lets cut the crap. (Score:3, Informative)
Your statements are worse than uninformed, they're apparently advocating unethical activity, and loud enough to possibly mislead those who might be mistaken to think you know what you're talking about because you've apparently read a few books about this.
Also, bear in mind this is not legal advice, consult a legal professional for advice.
First off, you are conflating withholding with your deduction issue. The issue has nothing to do with who pays taxes first, and if you are over-withheld you can apply for a refund. Besides which, corporations are withheld in a sense in the form of estimated quarterly taxes.
The reason the corporation is entitled to deductions on computers and cell phone bills that individuals are not is because the corporation is presumably purchasing these for a business reason, unlike the individual who generally purchases these for fun. For better or worse, US tax policy has decided to incentivize investment in business, in order to encourage profit making activity that grows the economy. If the company is in fact purchasing these items simply for the personal entertainment of its sole shareholder, and that's what it sounds like you are suggesting, then what you are advocating is fraud, plain and simple.
Re:McCain called it? (Score:3, Informative)
Oh btw, A report from the US Congress released last week found that two-thirds of corporations in the country paid no federal income tax between 1988 and 2005.
What's your point? I suppose you're trying to hint that those 2/3 companies are using loopholes and playing dirty to keep from paying taxes? You need to know how many incorporated businesses are *small businesses*. It's overwhelming. It's also easy to find thanks to the census bureau [census.gov].
Straight from the census: "About three quarters of all U.S. business firms have no payroll. Most are self-employed persons operating unincorporated businesses." In other words, 2/3 don't pay taxes, but 3/4 are a single person trying to make a living with his own corporation. Did you know that those single people pay themselves from that corporation, and then they pay income tax on the money? In other words, they do pay taxes. So btw, look up the facts!
Re:McCain called it? (Score:3, Informative)
From the page you cite, emphasis mine:
So I was specifically talking about corporate taxes. Anyway here is the GAO paper that I referred too. Tax Administration: Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005 [gao.gov]. While it does focus on all USCCs and FCDCs (which ~60% did not report tax liability) it also refers to "Large" USCCs and FCDCs which is defined as:
In 2005 ~25% of both Large USCCs and FCDCs reported no tax liabity.
So btw, look up the facts!
But I did!