And then we add the calls to set a minimum corporate tax rate to the mix and realize that the EU does this because Germany and France don't want businesses to go to Ireland instead of them.

Actually it's fine if businesses actually move to Ireland. The problem is not a guy running a machine shop in Antwerp moving it to Dublin. It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland.

> Actually it's fine if businesses actually move to Ireland.

It's really not if you're France, Germany, Britain, Spain, Italy, or any other major EU economy.

France has seen zero per capita economic growth, inflation adjusted, since at least 2003. They've had to sit by and watch as Ireland gets richer and richer.

Ireland now has a GDP per capita over $70,000, among the highest of any nation. Soon it'll be 100% higher than France, Germany and Britain. There's no way they want to see that continue, it's a humiliation to them while they all struggle to generate any growth at all. In nominal terms, Britain's GDP per capita has seen zero growth since 2004; you can imagine how much worse the inflation adjusted figure is. In that time Ireland went from $47k to $70k per capita.

Since 1990, Ireland has gone from a GDP per capita on par with Spain (with France ~50% higher than Ireland), to where Ireland is now 150% higher than Spain and 84% higher than France. In economic terms, that's extraordinary.

Here's what that looks like:

https://i.imgur.com/q99EtMk.png

No chance the other powers in the EU don't want to restrain that.

Ireland has less than half the population of the Paris metro area, so while the difference in GDP per capita may be stark, the actual amount of money is a pittance relative to the European economy. The Irish economy is less than 2% of the EU total. 100 billion EUR of GDP growth in Ireland is not the cause of stagnation in economies that are 10x it's size.

The problem facing other European economies is not that large amounts of actual economic activity is moving to Ireland, it's that Ireland's tax rules let it suck out the tax revenue from work, production and sales that occur across Europe. Ireland isn't getting a £1bn new Google office - London is - but the UK will see no corporate tax revenue from the products those people develop.

> The problem facing other European economies is not that large amounts of actual economic activity is moving to Ireland, it's that Ireland's tax rules let it suck out the tax revenue from work, production and sales that occur across Europe.

They wouldn't if they would actually tax work, production and sales that occur in their jurisdiction. This whole game works by assigning a jurisdiction to "profit" independent of those things, when profit is an accounting fiction. Unlike customers or employees, it has no physical existence, so it's easy for companies to arrange for it to be wherever it's most advantageous.

If you want to tax companies for employing or selling to your people, you can perfectly well have a payroll tax or sales tax.

Did you generate that graph? If you did you should redo it with a logarithmic scale. The current linear scale makes it impossible to draw conclusions.

I rendered it in logarithmic scale, it looks terrible and should never be drawn that way. It visually obfuscates the point: the dramatic extent to which Ireland is now pulling away.

It's extremely easy to draw conclusions specifically because it's a linear chart about per capita economic output over a relatively short duration of time.

The conclusion is that Ireland has drastically outperformed all the other nations in the chart since 1990. I think it would be hard to read that chart any other way, it's extremely obvious. For example it's not difficult to see approximately where each nation starts out and where they end up. Nor is it difficult to see just how large the output gap has become between Ireland and the rest. Logarithmic would mess up the clear visual that Ireland is pulling away from everyone else.

The point of the chart, is to show how Ireland has gone from an underdog economy in the EU, to an affluent powerhouse, leaving the other major economies behind per capita.

> It visually obfuscates the point

Or, it shows that the point is incorrect.

> Logarithmic would mess up the clear visual that Ireland is pulling away from everyone else.

No, if you don't see Ireland pulling away from everyone else in a logarithmic chart then they are not pulling away.

If you only see that signal in a linear graph then you are misleading yourself by thinking that they are doing so.

> Nor is it difficult to see just how large the output gap has become between Ireland and the rest.

Exactly. The "large output gap" you see clearly does not exist if you don't see it on a logarithmic chart!

Please post it, let the data speak for itself. If there is a large gap we will see it, if not, we won't.

It's fine from your perspective, but put yourself in the shoes of politicians. It's their job to advocate for the best outcome for their constituents, which means that they would like all of the jobs to come to their constituents.

>It's Apple claiming they should only pay Irish taxes on the profits of selling an iPhone developed in California, manufactured in China and sold in Italy because they have opened an office full of accountants in Ireland.

They're already paying various amounts of taxes in all of those regions. VAT is paid where the person buys the product, for example. Income taxes are paid where the workers are.

It is all well and good for Ireland, or whoever, to try to attract companies to move jobs there. But that is not what is happening. One Infinite Loop isn't in Dublin. What Ireland is doing is allowing companies that have a purely administrative presence in Ireland to claim tax residency in spite of having far more operations and employees in London, Paris, NYC, San Francisco, Hong Kong and numerous other high-tax places.

This allows tech companies to have their cake and eat it too by enjoying low tax rates on their entire European income without actually moving their operations to that country. If Google had 50,000 software engineers in Dublin, that would be one thing. But no one can seriously claim that any significant part of the work that produces Google Search goes on in Ireland, yet that is exactly what happens on their financial statements while they open a billion-dollar new engineering office in London.

Companies are free to move wherever they wish. They should not be free to claim they are domiciled somewhere that they plainly are not.

> no one can seriously claim that any significant part of the work that produces Google Search goes on in Ireland

Hmm. Most of their European SREs who keep the service up and running are in Dublin, alongside most of their European customer support, European accountants, European legal team.

Arguably, they contribute quite a lot to the success of the service.

If they weren't there, would the service have made as much inroad compared to if they weren't.

So, arguably, their presence is _very_ material.

Also, you're missing the point of the single EU market.

Ultimately, it's a game of assignment and they chose to assign their sales(& IP?) to the country that was most attractive to them.

Apple includes the VAT in the selling price of its products. Therefore it isn't correct to view it as Apple paying the VAT. The purchaser pays the VAT. Apple just collects it and passes that payment along to the taxing authority. Apple also doesn't pay the income tax of its employees. What Apple pays its employees are expenses and and therefore are deducted from its income. Apple pays tax on profits and not on its business expenses.

it's somewhat pointless to look at who pays taxes at the surface level. depending on market power, the actual burden of the tax can shift dramatically between buyer and seller. it has almost nothing to do with who officially pays the tax. see https://en.wikipedia.org/wiki/Tax_incidence

I’m not an economist. It seems to me that while the VAT on Apple’s products affect the supply/demand for those products it is best to view the VAT as something paid by the consumer. Do you know if this is wrong? This is my intuition but since I’m not an economist my intuition doens’t count for much.

Income taxes aren’t paid by apple. Those are paid by the employees.

So change them so that they're paid by the employer instead, if you think that would make a big difference.

This glib response is quite naive and ignores second order implications.

How would we tax a corporation as the number of employees trends to 0?

If they hold property in your jurisdiction then you have property tax. If they sell to your people then you have VAT.

And if they have no activities in your country at all, what gives you a right to tax them?

Restrictions on state aid date from the treaty of Rome 1957 (https://www.nao.org.uk/decision-support-toolkit/annexes/anne... ), and Ireland joined the EU in 1973. It's not about targeting Ireland, it's about creating a genuinely level playing field while ending trade wars.

I see. I did not know that! Although, I would still argue my point because Ireland is just a recent example. Businesses naturally go to where there are other businesses. You have to somehow offer them a better deal for them to go elsewhere. If you can't do that then you get an urbanization-like situation for businesses, except they prefer bigger and richer cities over smaller cities.

The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff.

There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery. Within countries, Germany is substantially better at doing this ("Mittelstand") than, say, the UK. And let's not forget that Germany wasn't always the strong country, they used to be "the sick man of Europe": https://www.ft.com/content/bd4c856e-6de7-11e7-b9c7-15af748b6...

>The argument is that City A offers a discount deal for factory A to move there, so then City B has to offer a deal for factory B, and so on; whereas if neither of them had offered a deal they would both be better off. Classic prisoner's dilemma stuff.

It's not a classic prisoner's dilemma, because you can play this game multiple times. It's an iterated prisoner's dilemma which can have a different outcome.

Furthermore, you're talking about this as though the government making the most amount of taxes is the most optimal scenario. There are plenty of economists that disagree with this notion, because this cost is passed on to the consumer and thus consumers are worse off.

In practice we don't actually see this happen either. In fact, this is how countries like Ireland managed to climb out of poverty.

>There is a tendency for industry to congregate, but better ways need to be developed to deal with that than taxpayer bribery.

Then I'd be happy to hear proposals that have a chance of working, but mostly what I see is countries like Germany happily taking advantage of the euro and brain drain, but they complain when other vignettes countries get some of the foreign businesses instead of them.

I don't think there are better solutions that work without the government regulating absolutely everything.

>Mittelstand

Please explain a bit more how this avoids companies from congregating in certain areas.

Yup, and then the moment German and French industries needed some help we started gettting talk about exempting them from state aid and anti-monopoly rules.