From Slashdot:
The administration says that more than a third of US foreign profits in 2003 came from Bermuda, the Netherlands and Ireland, and noted US companies paid an effective tax rate of just 2.3% on the $700bn they earned in foreign profits in 2004. Among tech companies affected by the crackdown, Microsoft joined 200 companies who signed a letter complaining that the proposed tax changes would put them at a disadvantage with their rivals, Cisco moaned that the measures ‘would adversely impact our ability to invest and grow our business in the US,’ and Google declined to comment for the time being.”
The use of Ireland as a tax haven for offshore companies has been the primary reason why the southern part of the island has such large installations from Microsoft, Google, Cisco, FaceBook and others. Funnel your corporate profits through there and you’re going to save a fortune in tax. This led to big companies setting up, larger salaries being paid and the beginning of the inflation of the cost of living (and housing). I’m not saying there’s a causal link but over the last 5 years, the only people I knew buying houses in Dublin were working for big tech companies.
This proposed change is going to affect the cost of doing business for companies which have settled in the republic and I’d predict this may forces some of them to homeshore their jobs back to the USA – which, of course, is the whole point of the exercise.
It seems I always arrive just after the bubble bursts.. I wish I had inflated wages. I’d buy a car for one thing.
Property prices down here have almost halved over the last year or so in many places. It’s lead to the economy almost collapsing, drastic cuts in services and benefits, and hikes in income tax. In short: they’ve screwed themselves. I’ve just turned up in time to help pay for the last seven years of excess (so many huge cars around here – I can’t possibly understand how people afford them) which is just.. awesome.
I see the Obama deal aimed more at curbing tax shelters, rather than companies that are doing business legitimately – not least as Ireland has a proper tax treaty with the US. Not saying that it’s not the thin edge of the wedge and they’ll all pack up and go home eventually, but if so, that’s a still a little bit in the future. The Irish media hyped it up a little, and then backed down a bit when they looked at the small print.
Oh, and R&D work gets special treatment from Obama in that proposal, so expect a lot of companies suddenly calling themselves research centers.