Ireland might be better off walking from the EU

Ireland must recover up to 13 billion euros ($14.6 billion) in unpaid taxes from Apple, European officials said on Tuesday.

On the surface, this might seem like a windfall to Ireland. To the contrary, Ireland said it will appeal the decision, saying Apple paid what it owed. The country has one of the lowest corporate tax rates in Europe, making it an attractive place for global companies.

On our trip to Ireland this summer we were reminded that Apple, Intel, Google and Facebook, and Silicon Valley tech startups are all opening offices in Ireland. We visited some of them to see for ourselves.

“Dublin looks a lot like home: a young and educated workforce, global business culture, population thirsting for new technology and Twitter and Facebook signs dotting the horizon,” as the San Jose Mercury News has observed.

“Labor and real estate are cheaper than in other European destination cities and, more than the familiar language or palatable food, the city’s tech tenant roster makes Dublin feel comfortable to Silicon Valley transplants.”

AerLingus now has a thriving nonstop flight from San Francisco to Dublin. ““Approximately 40 percent of the foreign direct investment to Ireland from the U.S. comes from the Silicon Valley area,”Aer Lingus chief executive Christoph Mueller  has said. “This route will strengthen the links between Silicon Valley and Ireland’s own cluster of tech companies in Dublin.”

Ireland might find a better partner in Silicon Valley than the EU, which is beginning to look and feel like “yesterday’s lettuce.”

About jeffpelline

Jeff Pelline is a veteran editor and award-winning journalist - in print and online. He is publisher of Sierra FoodWineArt magazine and its website SierraCulture.com. Jeff covered business and technology for The San Francisco Chronicle for years, was a founding editor and Editor of CNET News, and was Editor of The Union, a 145-year-old newspaper in Grass Valley. Jeff has a bachelor's degree from UC Berkeley and a master's from Northwestern University. His hobbies include sailing and trout fishing.
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11 Responses to Ireland might be better off walking from the EU

  1. nelsonminar says:

    The only reason Apple and Google and other tech companies are in Ireland is because Ireland is part of the EU. Companies declare Ireland their tax home for EU revenu and cut a sweet tax deal with Ireland. In exchange Ireland gets some local jobs and some tax payments. This ruling today is about the EU not being OK with Ireland undercutting the rest of the countries tax codes to this extent.

    The other half of this tax story is the way these companies avoid paying US taxes, by holding intellectual property in offshore companies. The Double Irish with a Dutch Sandwich was a popular arrangement, although recent legal changes mean companies have moved on to slightly different approaches. https://en.wikipedia.org/wiki/Double_Irish_arrangement

    • jeffpelline says:

      The tech companies are in Ireland because of its geographic location to European markets, not the political union. And compared with the rest of Europe, it also looks “a lot like home.” This shines a light on the deficiencies of the EU as much as it does Ireland.

      • nelsonminar says:

        Tax treatment is a big part of it. You want EU revenue to stay in the EU, so as not to pay US taxes on it. If Ireland were to leave the EU, then it would no longer be useful as a place to park EU revenue.

        I like Ireland too and admire its tech economy. But it’s built in part on having a specific, favorable situation with EU taxes. The rest of the EU isn’t happy about that and is pushing back.

      • jeffpelline says:

        Except that the sands are shifting at the EU with Brexit. The “old” EU will have to adapt — or die. Ireland has lots of attributes besides favorable taxes: a talented, young STEM-educated workforce, English speaking, great geography, low-cost transportation (including air), etc. I’d urge you to go see this transformation for yourself, as we did this summer.

  2. FortuneHiller says:

    I’m with nelsonminar on this. Good for the Irish that they came up with a successful scheme for attracting tech but yes, the scheme is based on avoiding taxes in European countries where the goods are sold. European tax payers have subsidized Ireland’s transformation into a modern European country. Fine. But it’s time to call it what it is and not romanticize international tax fraud.

    BTW, I think Greece, Croatia, Sardinia or Northern Italy look a lot more like my home, California.

  3. jeffpelline says:

    Dublin is becoming the Silicon Valley of Europe: http://www.nasdaq.com/video/investing-in-ireland–is-dublin-the-silicon-valley-of-europe–518158813
    Ireland also paid back its bailout loans early: http://www.wsj.com/articles/ireland-moves-to-repay-imf-bailout-loans-early-1410196613
    You can’t say that about other EU members!
    Go Ireland.

  4. FortuneHiller says:

    ” Old Europe”? How Rumsfeldian…

    The Irish will not slaughter the goose that lays its golden eggs. Like other small countries whose niche economies are based on or substantially enhanced by being tax havens they will navigate this very cautiously. Compare to recent policy changes in Luxembourg and Switzerland.

    Before mistaking UK tabloids as guidance on international issues, let’s have a look at this Reuters report from 2013: http://www.reuters.com/article/us-tax-bigtech-companies-factbox-idUSBRE96M09520130723
    “Historically, tax residence has been determined by where companies make sales”. These multinationals sell the vast bulk of their products in Europe outside of Ireland but “pay” taxes for them in Ireland at almost 0%. It’s fraudulent, plain and simple.

    Ireland is an accomplice to the Symantecs, Apples, Oracles in this scheme that finally is being addressed forcefully by the EU. Tax payers and entrepreneurs in France, Germany, Italy who make an honest living and pay their fair share of taxes shouldn’t have to make up for the loopholes exploited by others. Basta.

    • jeffpelline says:

      I think you’re confused about who has the upper hand in this negotiation. The “old” EU is being shaken to its core. Ireland is now the Silicon Valley of Europe. The UK is bailing on the EU. And notice how this “punishment” is retroactive; no mention of the tax rate going forward. It’s too late for economic “chest beating.”

  5. Don Pelton says:

    ““Here we have the largest corporation in capitalization not only in America, but in the world, bigger than GM was at its peak, and claiming that most of its profits originate from about a few hundred people working in Ireland — that’s a fraud,” Stiglitz said. “A tax law that encourages American firms to keep jobs abroad is wrong, and I think we can get a consensus in America to get that changed.”
    Nobel Laureate Joseph Stiglitz

    From “Stiglitz Calls Apple’s Profit Reporting in Ireland ‘a Fraud’”

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