> The point I'm making is that Google did pack up and leave

No they did not. There is a Google Spain and a Google France. They can't escape the Spanish law or the french law if they have an office in these countries, no matter where Google trully is incorporated, and there is an obvious reason why they have officies in these countries.

So what Google Spain and Google France do is that they pay huge fees to Google Ireland for the use of Google brand, so they never make a profit officially, then the money is ex filtrated from Google Ireland to tax havens.

But they did not leave Spain nor France.

Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product.

If Apple sells an iPhone (developed in the US and built in China) to retailers in Paris, should they have to pay French income tax on the entire profit of the phone? Of course not, that's ridiculous, even if the retailer is an Apple subsidiary.

> Google Search and Adwords are not developed in Spain or France. In effect these subsidiaries are just local distributors for a US product.

Neither they are developed in Ireland, but they chose to pay their tax there. Perhaps that's significant.

"Then along came Ireland."

This is utter nonsense. The problem is US tax repatriation laws introduced during the Clinton administration that allow US companies to leave their profits offshore in countries such as Bermuda or the Cayman Islands. Since they are only taxable on repatriation to the US, they pay no tax on them. Instead, they pressure Congress to introduce 'one-off' tax amnesties that allow them to repatriate at a much lower rate. This problem could be solved tomorrow if US politicians rescinded those tax laws. Ireland has no legal right to tax those profits, since they are earned by parent US company e.g. Google US. Which is perfectly correct, since the foundation of most of those profits are the intellectual property created primarily by the parent company. Don't let US politicians pull the wool over your eyes that this is a problem over which they have no control. In case you're interested, here's a good article that gives more background: http://www.rollingstone.com/politics/news/the-biggest-tax-sc...

And if they paid that tax in the US (which would then allow the US rate to be lower for the same revenue), how would that help Spain and France? The US would just be what Ireland currently is.

> (which would then allow the US rate to be lower for the same revenue)

While I'm sure it can be minimized, the US doesn't have a particularly low corporate income tax rate.

> And if they paid that tax in the US [...] how would that help Spain and France?

Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.

Exactly! Basically US companies have a massive tax advantage over local competitors in other countries. Every time you see another local bookshop closing down because it can't compete with Amazon's 'economies of scale', you should realise in fact a large part of its advantages are due to US tax repatriation laws.

> Companies like Google not having to pay tax on revenues outside the US is essentially a government subsidy. One that creates a "slush fund" for US companies to acquire their European competition. We're essentially in a trade war, just that Europe hasn't realized it.

Except that "US companies" incorporated in Ireland aren't US companies. Can't European companies also incorporate in Ireland?

Yes but the point is that if their main HQ is in another European country they can't avail of the repatriation laws unless that country has similar laws. Of course many EU countries have lower corporate tax levels than the headline US tax rate, but not all. I'm more concerned though about the race to the bottom in terms of corporate taxation than any EU/US competition. Interesting discussion, thanks.

No, because Google isn't paying the Irish corporate tax but instead moving the money to a second Irish company (hence the double Irish) based in the Bahamas. A European company with a subsidiary based in the Bahamas would trigger anti-avoidance laws, which a US company won't (until they bring the money back into the US) because of a loophole in the US anti-avoidance laws.

I think you misunderstand. The whole premise here is that none of the principals care where you're incorporated.

A company whose primary employees are in Europe and whose primary customers are in Europe can still be incorporated in Delaware and traded on the NYSE. These tax avoidance mechanisms aren't for "US companies," they only work if you're in practice an international company. A "European company" which is also in practice an international company could do the same by becoming nominally a "US company" without changing anything of consequence about their operations. Because international companies don't really care where they're incorporated.

The trade war isn't between US companies and European companies, it's between companies big enough to be "international" and everybody else.

I didn't know this context. Thank you for taking the time to write this.

Seems like a reasonable thing to decide at international level. We have already more or less forced (or come to an agreement with) Switzerland to not hide "dark money".

Getting some stronger wording in the tax legislation on EU level should be doable, but of course the Netherlands would squirm a bit.

It seems like they should just assess tax liability based on something other than where a company locates its headquarters.

Maybe in order to do business in jurisdiction X, where "doing business" == "selling ads" in Google's case, you have to pay taxes to X.

The selling of ads is already taxed. It's called VAT. It's a major revenue source for both EU, and all member nations.