This is why the EU rules on state aid ban this practice.
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...
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.
>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.
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.
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.
How would we tax a corporation as the number of employees trends to 0?
And if they have no activities in your country at all, what gives you a right to tax them?
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.
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.
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.
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.
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.