Dropbox to Establish International Office in Dublin
idaireland.com
idaireland.com
Sure, hate the game not the player, but they could have scored some major plus points on the day Public Accounts Committee in the UK have poured scorn on Google, Amazon and Starbucks:
There's nothing like politicians calling businesses who are obeying the law "insulting" in a play to stir up outrage to attract new businesses to a country. Come here, and be publicly harangued.
Instead Dropbox seems to have scored major plus points with IDA Ireland.
I would love to see the impact the UK boycott of Starbuck has had on their bottom line. Sure, not everyone cares but clearly enough people have forgone their red cups over the past few weeks for Seattle to take notice based on todays headlines.
So I'd venture a guess that Starbucks UK haven't seen any real decrease in sales - rather, it's probably their PR people who figures it's better to be seen as "responsible", as you put it, to not irritate the natives.
Setting aside those companies that deal in 'hard goods' (e.g. Amazon-the-store, Starbucks, etc), could someone explain the rationale of taxation w.r.t. corporate domicile?
Say I offer a software-based service in the U.S. (i.e. all the servers, billing, admin, dev, etc are done there), and by dint of luck/happenstance, a majority of the userbase ends up being in the EU. I (or my ISP) or my customers (or their ISP) are paying for the pipe between us (which is presumably taxed however the relevant localities have chosen); beyond that, I am not benefiting from any government services in the EU.
Should I nevertheless pay taxes in the EU (perhaps proportionately to each member nation based on the mix of nationalities of my userbase)? When I set up a European office, shall I be shamed into setting up HQ in whatever country houses the majority of my customers that year? What happens when that mix changes such that the majority of my customers are in a different nation?
All of this sounds absurd, but it sounds like the standard (or something similar to it) being applied to Dropbox in this case.
Let me put it another way, you say that:
>beyond that, I am not benefiting from any government services in the EU.
but you are benefiting from the government. Without a stable and moderately successful government, your customers wouldn't be in a position to be able to pay for your services. And that's exactly why most of your customers could, conceivably, come from the EU, but are unlikely to come from a developing country.
I'm not saying I agree with this; I don't know enough about how this sort of taxation affects the system as a whole, but I believe that's the logic.
Rather, corporate tax is a tax on making a profit. Consider the battle between development and sales - who's making the profit? To the very untrained eye, sales, because they're the ones bring the cheques home, and, indeed, salaries and bonuses in that department seems to confirm that. But without a good product to sell, there would be no sales, so it's obvious that devs deserve a cut as well - but how much?
That's essentially the same discussion Mrs Hodge is trying to have with Starbucks. Are the profits generated by sales (the stores in the UK) or by devs and backoffice (marketing, branding, sourcing, supply chain, finance etc etc etc), conveniently, but legitimately, placed outside the UK?
There aren't (generally!) duties on "imports" of intangible products and services worldwide, but the hard good example makes the notion sound even more absurd. This all reminds me of the crazy "Amazon" rules U.S. states have been setting so as to define affiliates as nexuses for sales tax purposes.
The issue in the case of Amazon, Starbucks et all in the UK right now is that these companies DO have a local permanent establishment, but manage to minimize their corporate tax through a mechanism called "transfer pricing", whereby they pay their sister branches in lower tax jurisdictions license fees etc for using brand, IP, software systems etc, thus increasing their tax deductible expenses in the high tax jurisdiction (UK).
What's useful to note is that none of this would be possible without double taxation agreements and the EU, both which successive UK govts and tax authorities have painstakingly and explicitly negotiated and agreed to. If there are no double taxation treaties, taxes for cross-border payments would in fact be quite punitive (withholding taxes etc).
It seems to me the UK govt thought they would benefit from these agreements when they where originally negotiated, but it has not turned out to be the case. The whole "moral outrage" is just the government passing the buck on a ball they themselves dropped.
As a side note, I don't believe moral outrage is conducive to the rule of law. These multinationals follow the letter of the law and have no further obligations. If the government thinks otherwise, they should renegotiate their positions and stop pointing fingers at others for a ball they dropped.
Dublin's #1 strength over places like London and Berlin is it's geographic size, which makes meetups accessible, leaders and role models available, and creates a friendly and familiar feel, where we all fee like we are part of something bigger than the startups that are here.
Side note: To anyone here on HN visiting Dublin in the future, feel free to connect with us, you'd be very welcome -- @ me on Twitter... @EamonLeonard
[1] http://thenextweb.com/insider/2012/12/03/dropbox-announces-f...
Talent pool. Higher unemployment at the current time.
It's also part of the Euro so a good base (rather than the UK) for collecting payments from the Eurozone countries.
Native English speakers.
Easy for other European citizens to go work there (no visa issues).
Irish passport holders can enter the Green Card Lottery (you can't with just a UK passport) so it could make relocation to the US easier for some.
Not exactly the same as Starbucks/Google: they are starting right now to provide a service, they need to leverage everything.
The popular one at the moment being The Double Irish (http://en.wikipedia.org/wiki/Double_Irish_arrangement) which Google, Amazon and Starbucks have been using very successfully recently.
Not suggesting this is necessarily what Dropbox are going to do but it might enable something like this, should they wish to.
Not forgetting:-
Facebook, Apple, Microsoft, Oracle, Pfizer, Adobe
(amongst others).
"Tax evasion" is not paying tax that you must pay. "Tax avoidance" is finding ways to not be liable for the tax in the first place.
It'll be interesting to see what they do with the profits from their companies (both the US and Ireland).
If they keep a chunk of income in Ireland and only transfer it to the US during tax amnesties then that's one standard form of avoidance.
If the US Dropbox entity starts paying a large sum of to Dropbox Ireland in order to license some part of the technology then we're in to the cunning world of tax avoidance proper.
> Tax avoidance is seeking to minimise a tax bill without deliberate deception (which would be tax evasion) but contrary to the spirit of the law. It therefore involves the exploitation of loopholes and gaps in tax and other legislation in ways not anticipated by the law. Those loopholes may be in domestic tax law alone, but they may also be between domestic tax law and company law or between domestic tax law and accounting regulations, for example. The process can also seek to exploit gaps that exist between domestic tax law and the law of other countries when undertaking international transactions.
(I'm a former tax accountant, at KPMG - these definitions are uncontroversial AFAIK)
Add to that the pub standards meetups, where there's regularly 1-200 people there, and I know of plenty of other people that don't travel to the events. There's a large amount of talent in Dublin, and I would imagine all the other cities in Ireland too.
And two of the world's top ten universities are in commuting distance. At a guess London's student population is larger than Ireland's too, and besides the aforementioned Oxford and Cambridge, London has two other top 100 universities, King's and Imperial.
The talent pool they'll be hiring from will probably be the EU anyway.
I mean, as they are referring before to Spanish, I guess it is Portuguese, maybe?
Because if they refer to Old Iberian (http://en.wikipedia.org/wiki/Iberian_language), it is going to be difficult to find anyone :-D
They could include Catalan and French (because of Andorra) but unlikely.
I am Spaniard, and I have NEVER heard addressing the different languages spoken in the Iberian peninsula as "Iberian". The languages with official recognition are Spanish, Portuguese, Mirandese, Catalan, Valencian, Aranese, Galego and Euskera (Basque), plus English in Gibraltar, add a few more for unofficially recognised ones I think I am not missing any ;-). French is not an official language in Andorra (only Catalan is), although is quite used