Will Google (And MSFT, And HP, And BAC) Be The Biggest Loser From The Irish Bailout?

Tyler Durden's picture

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

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bugs_'s picture

good to see more of this get exposed

more unsustainable fraud behind every miracle story

Cruel Aid's picture

Fraud... We are the fraud. Google is taking the path of least taxes. Should they pay US taxes straight up?

First sign of Ireland raising taxes sounds like the loop gets broken and Goog is overpriced by 20%.

And that CCX deal was absolutely a scam. It will be back, don't worry.


scatterbrains's picture

surely goog will get an exemption.

masterinchancery's picture

US taxes ridiculously high; lots of places to go besides Ireland, Google has all the cards in this game.

Oh regional Indian's picture

Indeed Master. The beauty of virtual corporations, with computers as the only movable asset.

They can nation hop from low to no taxes for a long time as everyone will be keen to suck on the GOOG teat. They have development centers in every major city in India.

At least when manufacturing companies sought to move sue to tax issues etc., they had plant and machinery to think of.

Not no more.



nmewn's picture

"And that CCX deal was absolutely a scam."

Not from the short side ;-)

GM is the next one.

M.B. Drapier's picture

The Irish "miracle" was quite genuine up to some point after around 2000ish, then the property madness took over.

Oh regional Indian's picture

The American "miracle" was quite genuine up to some point after around 1982ish, then the Bush madness took over.



Horatio Beanblower's picture

Ireland's money laundering HQ - http://en.wikipedia.org/wiki/International_Financial_Services_Centre


If there is a dirty deal to be done, it will be done in this building.

gecko_x2's picture

Off topic but what happened to chat.zerohedge.com ?

i don't want to live another day without that great service! :p

Howard_Beale's picture

It's right where it always was. Still there.

gecko_x2's picture

not for me.. got disconnected over the weekend and there is no reply on ports 6697 or 6667

unwashedmass's picture


yup...another population being held hostage by our power elite. fantastic.

revenue_anticipation_believer's picture


...i was just gonna point THAT out...google 'do no evil' ha ah ha liar liars like all the rest...


revenue_anticipation_believer's picture

1848 all over again...IRA do your duty, theres some real targets with names...

M.B. Drapier's picture

Is the 12.5% necessarily toast? The Irish government has been making a song and dance about it all week, including at the press conference this evening, which suggests that they think it's safe. It's even been suggested that the whole corp-tax drama is deliberate misdirection. ('FF' stands for the Irish ruling party.)

AUD's picture

Yet the Oirish peasants will pay their potato tax to the Government regardless.

asianist's picture

How dare those evil corporations get away with providing nothing but increased employment and economic value? They must give something back to the community!

Zon's picture

How about giving back those tax dollars they steal when they get bailed out?

asianist's picture

All I'm saying is, make sure you wave your pitchforks at the right people. I doubt Google or Microsoft had anything to do with crashing the Irish economy.

nmewn's picture

Well...if your an "enviromentalist" (whatever the hell that is these days) there is no place to hide the carbon footprint of one single Google server farm.

Choices bitchez...LOL.

i-dog's picture

"How about giving back those tax dollars they steal when they get bailed out?"

ummm ... When did Google and Microsoft get bailout dollars? I missed that one!

Chandos's picture

Well...the IRA just got a new set of targets...

mcarthur's picture

My Irish relatives are a bunch of piss tanks.  They do not deserve tax breaks.  Tax breaks should be exclusively for tight lipped Germans and Swiss that walk like they have a broom stick up their ass.  The Irish on the otherhand tend to use both sides of the sidewalk as they make their way from Sunday pub lunch to their freshly painted two bedroom stone house.  Definitely not deserved of a tax break.  Oh, and throw Google and all those other bastards into the mix. 

Clapham Junction's picture

Ha, Mcarthur you Orange swine! Let me finish my Powers and and I'll be round to kick your arse!!!

mcarthur's picture

I'm ready for you mate.  Just finished off my last Twinnings tea you swine.  Now just make your way to Saskatoon Saskatchewan and we'll have it out. 

sgt_doom's picture

Of course, the so-called "Irish miracle" was simply insurance companies offshoring their administrative jobs, beginning in the late '70s, lead by Prudential, to Ireland, then a bit later the exodus began with "profit shifting" to the E-Isle.

And just do a simple one-to-one comparison between those American (and Euro and Japanese) cities that became economically-distressed rust-belt cities, and those cities which burgeoned in India and China.

Back in 2007, there was an exact one-to-one correlation between the percentage of wage increase among 20-year-olds to 28-year-olds in China, and wage decrease among the same age cohort in the USA.

Nothing surprising here to anyone paying attention, but thanks for the post.

mcarthur's picture

Surprise, surprise.  The last time I was in Ireand I made note of a rather large Bank of America administrative office in the middle of nowhere. 

Budd Fox's picture

But if ALL the Governments raise the taxes at reasonable levles, say around 28/30%, where this corporate thieves are going to hide??

I like Russia in this..you don't pay taxes, they send you assault troops.

i-dog's picture

"raise the taxes at reasonable levles, say around 28/30%"

You call 28-30% reasonable?!!! Places like Hong Kong can thrive with a maximum corporate tax rate of 17.5% -- personal tax rate is MUCH lower -- (AND no VAT, no tariffs, no sales taxes, no payroll tax, no solidarity tax, no municipal tax, no SS levies, no medicare levies, no..........) ... simply because the government stays the fuck out of providing services that the private sector can provide more cheaply and to a higher standard!!

Ireland would also have survived nicely on the 12.5% rate if they hadn't blown their savings investing in toxic American MBS/CDS frauds!!

All the western property bubbles are a direct result of the bankstas' 100% LTVs backed by SIV fraud schemes. The Asians are still driving their property prices up while putting in hard-earned cash at 60% LTVs (or less).

Oh regional Indian's picture


Hong kong does not count. They have no army/navy/air force, are under the chinese umbrella. Any other gubbermint worth it's salt spends pretty hefty chunks of their monies on "Defense". Plus, I wonder where HK gets it's power from.

But you get the point.



i-dog's picture

"But you get the point."

No, I don't, ORI. Hong Kong had both the British army and navy stationed there, to "protect" it from China, for nearly a century. The Brits didn't do that for free!

Further, Hong Kong doesn't go around threatening its neighbours with nuclear strikes (eg. against Pakistan, in the case of India) or invasions (eg. against Cuba, Philippines, Guatamala, Vietnam, Panama, Iraq, Afghanistan and dozens of others in the case of the US).

That's the beauty of a free market society ... you don't piss anyone off, so you don't end up having punch-ups with your neighbours. No trade wars, no currency wars, no cold wars, no hot wars, no religious wars, no wars against drugs, no wars against terror.

On top of that, Hong Kong welcomed millions of refugees who snuck in over the border from China -- between 1948 and the 1980s -- and provided them with housing, medical care and job opportunities -- all when the corporate tax rate was only 15% and personal income tax rate for an average office worker was less than 5%.

DisparityFlux's picture

The austerity package terms fine print stipulated the end of all rainbows shall hence forth be in Germany and leprechauns are to be outsourced to an Indian firm.

Cathartes Aura's picture

the parasite/host relationship can be a delicate balancing act, but eventually there needs to be a purge, as the host loses vitality, life even. . . the parasite must be removed in order for the host to survive. . . recovery of vitality happens over time, but cannot begin until the parasite is disposed of.

the bankers & corporate parasites will jump to the next advantageous "zone" - who is left "holding the bill" can only be answered by the host.

pitz's picture

So these big corporations will just run from country to country, extorting tax breaks and extorting governments to pledge their lands in exchange for billions of dollars of loans to lower tax rates? 

Sure sounds like one giant circle jerk that won't end well. 


The Axe's picture

This stuff the Tyler posts is terrific, and of course sad that we let companies like GOOG just rape us. Of course trading on this or any information is useless in a controlled, no volume, FED fueled market...just forget it...Thanksgiving week will see more meltups then you could imagine.

pitz's picture

Yup, yet the sheeple think that Google is a miraculous company because they provide a search tool (which never was any better than Altavista had back in the late 1990s), allow people to download videos (something that definitely pre-dated Googles' existence), and have a mediocre web based email reading package.

Every time I look at Googles' financials, they never make any sense.  And I don't know anyone who actually clicks on Googles' ads either, so why the hell are advertisers paying them anything?  Or are they?? 

Wouldn't surprise me that, in a few years, its discovered that Google was just one giant scam, top to bottom. 

Aristarchan's picture

Google is one of the most intrusive companies in the world. They make their money selling data mined from their search engine users to advertisers and targeted marketing companies.

Bearish News's picture

"which never was any better than Altavista had back in the late 1990s".

Altavista was an extremely simple algorithm, primarily based on a page's "meta-keywords", which are selected by the site owner/manager. This algo proved extremely easy to exploit, and Google revolutionized the search industry by introducing pagerank (looking at how many other reputable sites/pages link to the page in consideration for ranking).

I've talked to top search execs from Google, Yahoo, and MSN. Seen them speak at conferences. Trust me, Google is best of breed. They're at least 2-5 years ahead of the competition at this point, and the lead keeps getting bigger.

I don't know how this tax thing will play out, but I expect it will amount to nothing. After all, if they "bust" Google, they might have to bust everyone. That's a lot of special interest to fight.

omi's picture

How the F does this make any sense?

buzzsaw99's picture

Yeah, and eric schmidt doesn't get groped at the airport either.

Nobody touches the schmidt lucky charms.

It's not illegal because the corporations write the tax code.

G-R-U-N-T's picture

Scanning seems to be the in thing perhaps groping is an up and comer?


nmewn's picture

Don't Touch My Junk! ®

IrrationalMan's picture

so this is why the futures gapped up 7 point...

Ludwig Van's picture

99er -- Just want to say thank you for this and all the charts you post on ZeroHedge. I never let one go by; each is uncannily appropriate. Keep up the good work.