A few days back we asked whether if as part of the now certain Irish austerity package, the imminent rise in the corprate tax rate for offshore companies based in Ireland would result in a crunch in the bottom line for US corporations such as Google. Now that a hike from the prevailing 12.5% rate is inevitable, US companies have launched an offensive to make it clear that only Irish citizens will be subject to the critical austerity measures. The Telegraph reports that “the Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country’s low corporation tax rate is raised.” If companies, which are purely circumventing much higher US corporate tax rates, also have to share the austerity burden, they will simply depart from the already insolvent country, leaving it with even less tax revenues, thus accelerating the toxic loop of greater insolvency coupled with even less revenue. And since the IMF is backed primarily by the US, which is end-domicile to the bulk of the corporations in question, it is obvious that MNCs have all the leverage and will most certainly get their wishes, further widening the chasm between the “corporation” and the simple Guinness-drinking, potato chewing peasant. In the brave new world, the pursuit of life, liberty and happiness applies only to (bailed out) banks and corporations. Everyone else has been relegated to footnote status.
More from the Telegraph:
The warning – from executives at Microsoft, Hewlett-Packard (HP), Bank of America Merrill Lynch and Intel – spoke of the “damaging impact” on Ireland’s “ability to win and retain investment” should the country’s corporation tax rate be increased from 12.5pc.
It came as talks between members of the Irish government and the European Union and the International Monetary Fund continued around the clock on a financial aid package of as much as €100bn to shore up the country’s beleaguered banking system.
Although Brian Lenihan, the Irish finance minister, has indicated Ireland’s 12.5pc corporation tax rate – the lowest in the eurozone – will not be raised, a number of factions within the European Union are known to have pushed for it to be increased in return for the bail-out.
Nicholas Sarkozy, the French president, said yesterday that while raising taxes will not be a condition of the bail-out, he expects Ireland to raise its corporation tax rate: “It’s obvious that when confronted with a situation like this, there are two levers to use: spending and revenues. I cannot imagine that our Irish friends, in full sovereignty, [would not use] this because they have a greater margin for manoeuvre than others, their taxes being lower than others.”
Foreign corporations who had found a beneficial tax climate in Dublin (most notably Google) now account for a major portion of the country’s economy.
Foreign investment equates to €110bn – or 70pc – of all exports with US companies alone employing more than 100,000 workers.
Yet if Ireland does not relent, which is unlikely, the bulk of US corporations will simply depart for such recently beligerent partners to the US as China:
While the companies are not threatening to leave at this stage, the statement
– signed by senior Irish executives from each of the four companies
mentioned – does directly point out that although Ireland’s tax rate may be
low in European terms, it is not when compared with locations such as
Singapore, India and China.
Yet the biggest loser of all this may be Google, which as was portrayed recently in an extensive analysis by Bloomberg, benefitted massively by a complex (and perfectly legal) Irish-based tax avoidance trick, which adds up to $100/share to the stock price.
An expose in Bloomberg details how courtesy of various, perfectly legal, tax avoidance schemes, Google’s effective tax rate is 2.4%, which has boosted the company’s stock price by a whopping $100/share!
Is Google’s loss in market cap about to make the EU’s contribution to Ireland (whether $80 or $180 billion) seem pale in comparison?
h/t Titan Group ltd
 Be The Biggest Loser From The Irish Bailout?){kind=link}