Is a minimum international level of corporation tax a threat to Ireland?

Kermit.de.frog · 07-06-2021 1:00am

This has to go before the OECD so it will be quite a while and likely to end up significantly watered down.

The feelgood propaganda statements have already been made.

20silkcut · 07-06-2021 8:02am

pixelburp wrote: »

Cribbing about the weather betrays an axe being ground that doesn't pertain to the notion of taxation or economy. A strong bias that the poster is simply projecting their obvious jealousy our European neighbours have better weather. Faraway hills.

And if we ARE talking weather, our climate is apparently better for maintaining data centres, an industry increasingly important in our cloud based world, so it's swings and roundabouts stuff. I get it, the Irish hate their own weather, we're obsessed and more than a little bitter about it(seriously, talking to Americans they boggle at how much it influences our conversation topics).

A lot of Irish people particularly those involved in weather/ moisture dependent industries like agriculture and horticulture etc do not have a bitter opinion on Irish weather. In fact it is the complete opposite. This country is a paradise climate wise in comparison to the vast majority of the rest of the world. Try and buy a few acres of land in the south west or south east of Ireland and you will know all about it.
Until 2018 I used to think our weather was generally crap but the (bitter) taste of a dry climate that we got that summer changed my outlook on that.
Dry climates and Mediterranean type climates are really only attractive in coastal areas. A dry dusty hot climate in the interior of a country far from the coast is oppressive and hellish. Death Valley is only a few hours drive from the idyllic environs of Beverley hills. The interior of countries like Spain and Portugal far from the costas are not exactly desirable places to live or visit. The attractive zones are really only a strip along the coast in the Mediterranean type climate.
Climate is most certainly not a negative factor in Ireland in comparison to the vast majority of the rest of the world and would have almost zero impact on industrial decisions by MNC’s .

shockframe · 07-06-2021 11:16am

Implementing something like this will lead to a greater risk of an Ireland bankruptcy.

listermint · 07-06-2021 11:23am

FreshCoffee wrote: »

On the annual German InterNations Expat survey for 2021, Ireland is in the bottom 10 for the cost of living (56th) and the quality of life (50th). It's based on 12,000 respondents from 59 destinations.

https://cms-internationsgmbh.netdna-ssl.com/cdn/file/cms-media/public/2021-05/2021-05-18_Press_Release_Expat_Insider_2021_Ireland.pdf

Ok so you picked a german survey private company that is surveying only Germans 12,000 Germans globally might I add.

The survey is fundamentally flawed on so many metrics. Have you considered you know a wider Survey that doesn't ask a tiny portion of only a single nationality.....

Personal never worked with a single German in this country and I've worked with probably 50 plus nationalisties at this point in Ireland.

How many of these did your brush past til you found one narrow one that fitted your view point .just a query ? Was this page 7 on Google search.

RandomViewer · 07-06-2021 11:30am

No insults.

Capt'n Midnight · 07-06-2021 12:43pm

tjhook wrote: »

The most obvious example is cars - we don't make any in Ireland. Will Volkswagen etc have to start paying corporate tax in Ireland rather than Germany for cars sold here?

Only applies where margins are over 10% doesn't it ?

Last I knew margins for car makers was about 4% and VW were aiming for 6% , but lots of write offs over dieselgate.

Historical note IIRC the first VW's assembled outside German were on the Long Mile Road because of our tariffs.

NIMAN · 07-06-2021 12:46pm

so can we clear something up?

This €2.2bn annually we'll lose? This is actually a loss only if the MNCs up and leave?

If they all stay in Ireland, would we not actually gain from it?

shockframe · 07-06-2021 12:59pm

NIMAN wrote: »

so can we clear something up?

This €2.2bn annually we'll lose? This is actually a loss only if the MNCs up and leave?

If they all stay in Ireland, would we not actually gain from it?

€2.2bn is just for starters. The knock on effect of them upping sticks won't just be the MNC's themselves. There'll be other services that will potentially be in trouble without them. That 2.2bn will soon sound like the soft landing circa 2008-09

Its been one of the major things that prevented us becoming another Argentina or Greece. Remove it and the consequences on us without a Plan B could be felt for a very long time.

FreshCoffee · 07-06-2021 2:16pm

listermint wrote: »

Ok so you picked a german survey private company that is surveying only Germans 12,000 Germans globally might I add.

The survey is fundamentally flawed on so many metrics. Have you considered you know a wider Survey that doesn't ask a tiny portion of only a single nationality.....

Personal never worked with a single German in this country and I've worked with probably 50 plus nationalisties at this point in Ireland.

How many of these did your brush past til you found one narrow one that fitted your view point .just a query ? Was this page 7 on Google search.

Don't need to Google. InterNations surveys (which are of their worldwide membership and not only of Germans) are regularly reported in well recognised international media. For example here in Ireland:
The Irish Times
https://www.irishtimes.com/life-and-style/abroad/dublin-ranked-the-worst-city-in-the-world-to-move-to-for-housing-1.4102979

thejournal.ie.
https://www.thejournal.ie/ireland-ranking-housing-worldwide-for-expats-4916195-Dec2019/

Another survey:
https://www.numbeo.com/quality-of-life/rankings_by_country.jsp
Ireland ranks 27th in Quality Of Life.

greenfield21 · 07-06-2021 2:23pm

I think it all comes down to whether both parties reach an agreement in the US. They will then drive it on with the other big players following this, they really don't need everyone anyway. Also I think I saw a tweet yesterday where the Dutch and Luxemburg finance ministers where in support of it so Ireland may have little support. I also don't think there will be any way around it even if you don't sign up. We've already received Enough negative PR now is the time to get ahead of the issue instead of being further dragged through the mud and kicking the can further down the road.

[Deleted User] · 07-06-2021 2:34pm

This proposal is a threat to the long-term sustainability of Ireland's current economic model and we must respond ruthlessly. I need two poets, one sociologist, a publican and a graphic designer in the Emergency Meeting Room in Government Buildings, right now! Go! Go! Go!

NIMAN · 07-06-2021 2:35pm

shockframe wrote: »

€2.2bn is just for starters. The knock on effect of them upping sticks won't just be the MNC's themselves. There'll be other services that will potentially be in trouble without them. That 2.2bn will soon sound like the soft landing circa 2008-09

Its been one of the major things that prevented us becoming another Argentina or Greece. Remove it and the consequences on us without a Plan B could be felt for a very long time.

I think you picked me up wrong.

I was asking if the 2.2bn lost is dependent on the MNcs leaving?
If they stay, we lose nothing?

shockframe · 07-06-2021 3:30pm

NIMAN wrote: »

I think you picked me up wrong.

I was asking if the 2.2bn lost is dependent on the MNcs leaving?
If they stay, we lose nothing?

I can't imagine them staying if we raise the rates tbh.

The likes of Apple and Microsoft will move onto the next attractive market for FDI. We'll be a distant memory to them.

You only have to look at the lengths they go to avoid tax.

Saturday was the last thing we needed. A spiralling National Debt and Covid 19 was bad enough without adding to it.

hotmail.com · 07-06-2021 3:57pm

enricoh wrote: »

Bring back Donald, all is forgiven!

This is what Trump wanted. He'd support this policy.

fly_agaric · 07-06-2021 4:36pm

shockframe wrote: »

I can't imagine them staying if we raise the rates tbh.

The likes of Apple and Microsoft will move onto the next attractive market for FDI. We'll be a distant memory to them.

You only have to look at the lengths they go to avoid tax.

Saturday was the last thing we needed. A spiralling National Debt and Covid 19 was bad enough without adding to it.

I thought (laymans understanding) whole idea behind these moves is that there won't be anywhere for them to go in their main markets (i.e. EU/US/Asia...rich OECD countries) to escape these taxes. If there is an agreement & we opt out/try & block it and refuse to tax them (more), someone else will anyway. These companies will (for forseeable future) want an EU base or bases. Many of them already have a lot of real economic activity in Ireland, not just a brass plate, so uprooting that to no benefit is just another burden on them. So question for us is if we lose our tax advantages relative to others in the EU can we keep them here? I think it could be hard in the long term if we can't up our game and keep up with others in the EU as regards how well the country is run, how good it is as a place to live, i.e. non tax benefits the MNCs may get from locating business here.

flexcon · 07-06-2021 5:08pm

shockframe wrote: »

I can't imagine them staying if we raise the rates tbh.

The likes of Apple and Microsoft will move onto the next attractive market for FDI. We'll be a distant memory to them.

You only have to look at the lengths they go to avoid tax.

Saturday was the last thing we needed. A spiralling National Debt and Covid 19 was bad enough without adding to it.

Raising corporation tax from 12.5% to 15% (removing the "where place of sales takes place) would mean our corporation tax would go from 12.5billion to 14.4 billion. So between ALL corporations in Ireland they would share a yearly increase of 1.87 billion.

I feel confused why media has taken the % increase as the lead issue, when it's at most a red herring for the actual problem.

The real issue is where the corporation tax is to be paid going forward.

Gooser14 · 07-06-2021 7:22pm

NIMAN wrote:

This â‚¬2.2bn annually we'll lose? This is actually a loss only if the MNCs up and leave?

It's nothing to do with the MNCs leaving. The loss will be as a result of the requirement for CGT to be paid in the country where the profit is made. Currently the MNCs are paying lower taxes in Ireland on profits made in other countries. These are the taxes we will lose.

flexcon · 07-06-2021 7:40pm

Gooser14 wrote: »

It's nothing to do with the MNCs leaving. The loss will be as a result of the requirement for CGT to be paid in the country where the profit is made. Currently the MNCs are paying lower taxes in Ireland on profits made in other countries. These are the taxes we will lose.

This is not entirely correct though. Ireland chooses not to tax the other countries. I have it on inside knowledge that Apple does not pay a single euro of tax on profits from the EU(excluding Irish sales)

moon2 · 07-06-2021 7:49pm

flexcon wrote: »

This is not entirely correct though. Ireland chooses not to tax the other countries. I have it on inside knowledge that Apple does not pay a single euro of tax on profits from the EU(excluding Irish sales)

And this legal shananigan is exactly what the poster you quoted is saying won't work.

If apple sell an IPhone in Germany they'll owe tax in Germany. The current system allows them to funnel that 'profit' to another country. The proposed system taxes the point of sale - what apple choose to do with the money after the sale will no longer be able to reduce their liability in Germany.

flexcon · 07-06-2021 8:10pm

moon2 wrote: »

And this legal shananigan is exactly what the poster you quoted is saying won't work.

If apple sell an IPhone in Germany they'll owe tax in Germany. The current system allows them to funnel that 'profit' to another country. The proposed system taxes the point of sale - what apple choose to do with the money after the sale will no longer be able to reduce their liability in Germany.

Correct but To make this more interesting, pascal says we will loose approx 2.2billion per year. If we are not taxing on those other countries profits now, then why would we loose? It changes nothing for us.

My internal fear is the 2.2billion factors in MNC leaving in some capacity

beggars_bush · 07-06-2021 10:04pm

The Irish tax system is basically based on swindling other countries out of their entitled tax take

Geuze · 07-06-2021 10:11pm

flexcon wrote: »

This is not entirely correct though. Ireland chooses not to tax the other countries. I have it on inside knowledge that Apple does not pay a single euro of tax on profits from the EU(excluding Irish sales)

Note that all Apple profits are eventually taxed in the USA.

blackwhite · 08-06-2021 10:51am

Mullaghteelin wrote: »

Our cousins in America have lost out on jobs that have ended up here instead, and then we tut-tut hypocritically when any US president hints at encouraging such companies back to the US.

This is utter nonsense - and one pushed time and again by American politicians who know it's easier to blame other countries than to acknowledge any problems with their own policies.

The US has historically taken an overly punitive stance on taxation of foreign-earned profits by US companies (and US citizens for that matter), which has resulted in it being virtually unviable for a US company to produce something within the US and then export for sales overseas. They effectively will impose double-taxation on any overseas incomes that they can, and the only way for companies to avoid that is to ensure that everything remains outside the USA.

If those jobs weren't attracted into Ireland, they'd still have been located somewhere outside the US - purely due to US taxation policies.

Nijmegen · 08-06-2021 3:48pm

The big issue isn't the headline rate, it's moving to a policy of taxing where the customer rather than (as today) where the staff are. That's the kicker for Ireland.

The reason MNCs move thousands of people to Ireland to work is so they are fulfilling orders and service in Ireland, of people back in their home countries. This allows the MNC to book the revenue and the profit here.

In future, if that sale is booked in the country where the customer is then there is no reason to move an employee from, say, Spain to Ireland to pay Irish wages, Irish cost of living, etc, when they could be living and working in Spain servicing the market there.

It's unlikely MNCs will pull out of Ireland in whole or immediately. And we will see investments in particular where smaller companies want 1 base in Europe to operate.

But the larger firms who expand by the thousands - think TikTok, who have gone from zero to thousands in a very short period of time - will think twice about expanding here. Just place the employees in their home country and fly them to your European HQ for training and then send them home again.

We will lose not just the corporation tax, but the income taxes, the PRSI, and the economic activity in the country.

That's the threat to us and I've yet to hear a resounding response to it. Our high wage, high cost economy made sense when you could write off so much tax it didn't matter that the average rent in Dublin is near €2k/mo and the average rent in a Baltic country (where they're in the EU and speak Russian) is sub €500 and you have to pay the worker in Dublin to cover that difference.

flexcon · 08-06-2021 10:21pm

Nijmegen wrote: »

The big issue isn't the headline rate, it's moving to a policy of taxing where the customer rather than (as today) where the staff are. That's the kicker for Ireland.

The reason MNCs move thousands of people to Ireland to work is so they are fulfilling orders and service in Ireland, of people back in their home countries. This allows the MNC to book the revenue and the profit here.

In future, if that sale is booked in the country where the customer is then there is no reason to move an employee from, say, Spain to Ireland to pay Irish wages, Irish cost of living, etc, when they could be living and working in Spain servicing the market there.

It's unlikely MNCs will pull out of Ireland in whole or immediately. And we will see investments in particular where smaller companies want 1 base in Europe to operate.

But the larger firms who expand by the thousands - think TikTok, who have gone from zero to thousands in a very short period of time - will think twice about expanding here. Just place the employees in their home country and fly them to your European HQ for training and then send them home again.

We will lose not just the corporation tax, but the income taxes, the PRSI, and the economic activity in the country.

That's the threat to us and I've yet to hear a resounding response to it. Our high wage, high cost economy made sense when you could write off so much tax it didn't matter that the average rent in Dublin is near €2k/mo and the average rent in a Baltic country (where they're in the EU and speak Russian) is sub €500 and you have to pay the worker in Dublin to cover that difference.

Great point. Taht would only work with WFH, or it would take years for MNC to setup smaller centres in each country

enricoh · 08-06-2021 10:31pm

Nijmegen wrote: »

The big issue isn't the headline rate, it's moving to a policy of taxing where the customer rather than (as today) where the staff are. That's the kicker for Ireland.

The reason MNCs move thousands of people to Ireland to work is so they are fulfilling orders and service in Ireland, of people back in their home countries. This allows the MNC to book the revenue and the profit here.

In future, if that sale is booked in the country where the customer is then there is no reason to move an employee from, say, Spain to Ireland to pay Irish wages, Irish cost of living, etc, when they could be living and working in Spain servicing the market there.

It's unlikely MNCs will pull out of Ireland in whole or immediately. And we will see investments in particular where smaller companies want 1 base in Europe to operate.

But the larger firms who expand by the thousands - think TikTok, who have gone from zero to thousands in a very short period of time - will think twice about expanding here. Just place the employees in their home country and fly them to your European HQ for training and then send them home again.

We will lose not just the corporation tax, but the income taxes, the PRSI, and the economic activity in the country.

That's the threat to us and I've yet to hear a resounding response to it. Our high wage, high cost economy made sense when you could write off so much tax it didn't matter that the average rent in Dublin is near €2k/mo and the average rent in a Baltic country (where they're in the EU and speak Russian) is sub €500 and you have to pay the worker in Dublin to cover that difference.

Hmm, I think you have the story right, if you have Ireland is gonna have a wake up call fairly lively.
Our cost base is way too high and corporation tax shielded us from having to do anything to tackle it.
https://www.irishtimes.com/business/economy/dublin-most-expensive-place-for-expats-to-live-in-euro-zone-1.3543402?mode=amp

Nijmegen · 08-06-2021 11:03pm

flexcon wrote: »

Great point. Taht would only work with WFH, or it would take years for MNC to setup smaller centres in each country

Why would it take them years? Tik Tok went from 20 to 1,100 employees in Ireland in 1 year, according to their own press release. They've since taken more office space that will accommodate up to 2,000 staff. Now, that's a contraindication to the idea that they'll pull out of Ireland, but this situation will evolve over time. I guess my point is that MNCs can move very quickly when it suits them. See also those that pulled out of Ireland for lower cost domains in the past.

enricoh wrote: »

Hmm, I think you have the story right, if you have Ireland is gonna have a wake up call fairly lively.
Our cost base is way too high and corporation tax shielded us from having to do anything to tackle it.
https://www.irishtimes.com/business/economy/dublin-most-expensive-place-for-expats-to-live-in-euro-zone-1.3543402?mode=amp

Our cost base, planning laws (remember the Apple data center? How many others never got to planning consideration because the companies just decided not to try here. Also, planning laws holding up housing development, driving up costs), lots of stuff feeds in a circular motion the problems we're going to have.

I'm not sure it'll be a big bang, but it may well be like parts of the US after manufacturing jobs moved abroad. And I'm not sure we've seriously considered it at all, or how to stimulate domestic success stories. The Irish govt is set up to think about and support MNCs coming in, not creating Irish MNCs going abroad at the kind of scale that's really meaningful. Many large and successful Irish companies end up going abroad, ala Stripe.

Kermit.de.frog · 08-06-2021 11:29pm

Check out the front of tomorrow's FT

http://cf.broadsheet.ie/wp-content/uploads/2021/06/E3YsoqjWQAAsz4H.jpg

The Brits want an exception of course.

Nijmegen · 09-06-2021 9:25am

Kermit.de.frog wrote: »

Check out the front of tomorrow's FT

http://cf.broadsheet.ie/wp-content/uploads/2021/06/E3YsoqjWQAAsz4H.jpg

The Brits want an exception of course.

There's still a ton of negotiation and horse trading (as, in fairness, Paschal D pointed out) before this is locked in. G20 next and then WTO. There's plenty to play for in the nuance of the policy that may make or break us.

Cookie_Monster · 09-06-2021 9:53am

Geuze wrote: »

Note that all Apple profits are eventually taxed in the USA.

Not really since the money is never repatriated

Is a minimum international level of corporation tax a threat to Ireland?

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