So basically, dropbox makes a public announcement to tell the world (and the shareholders) they're now engaging in tax evasion in Europe to make better profit.
I'm guessing he's actually referring to tax avoidance. Not sure how long it will last though as the UK is going be clamping down on this http://www.bbc.co.uk/news/business-20559791
technically it's not illegal, but completely immoral. Imagine if I channelled all my PAYE taxes through an offshore company, who would pay for our health system, infrastructure etc.
They're not expanding to Ireland. That's the point. Now they route all transactions from non-US customers through the Irish subsidiary and keep their money over there. They pay up 15% or whatever the tax rate is instead of the 35% over here. They keep the profits there waiting for a tax holiday, then move the money back when that happens. They can probably even claim the 15% as a foreign tax credit during the tax holiday.
Pretty simple. :)
While not illegal, it's a little bit dodgy. But it's what everyone does these days, so why not?
I'm not suggesting that is why Dropbox are moving to Ireland. I'm saying that if that was the reason as brought up by the OP then they should be aware of current events in the UK where companies like Amazon are making billions of pounds in the UK and paying virtually no tax - even though they use our roads and infrastructure to conduct their business.
"better profit" but only in the eyes of accountants, for a while.
The money you've paid less tax on is still offshore. If you want to bring it back to your country then you have to pay tax on it (minus what you've paid already overseas) so it's not just a simple scheme to minimise tax. If you need the money to maintain cash flow then you've got no real choice but to pay full whack on it to get it back into the US.
What many US companies are doing is hoarding huge piles of it overseas in the hope that the US will have another tax amnesty (like 2004) and they can bring it back in to the US without paying as much tax as they would have had they just paid it in the US in the first place.
Here's a simplified example based roughly on real figures.
Take a US company that makes a $1bn profit in a year. They would have to pay 35% tax on that if they kept it in the US.
Using a Double Irish Agreement and paying a $1bn fee to those foreign entities in Ireland/Cayman Islands they make $0 profit in the US and pay $0 corporation tax. In Ireland they pay 12.5% tax on that money, so Ireland get $125m.
Meanwhile the cash sits overseas and the US company can't use it. If they wanted to bring it back to the UK they'd need to pay a $225m tax bill (35% tax on $1bn minus what is paid overseas); it's unsurprisingly more complicated than that but we'll leave it simple. It's also earning interest overseas but we'll ignore that for this example.
What they can do is bung this $225m on the balance sheet as a future tax liability, since if the worst happens and they run in to cash flow problems they'd have to bring all of the original money back into the US and pay remaining tax on it. Ironically, this means they can offset even more profits against this liability.
Anyway, they wait until the US has a tax amnesty for bringing back money from overseas (last one in 2004) and then pay a fraction of the tax they would have originally. The current campaign is for an amnesty rate of just 5.25%
So I'm enjoying my blank page because for some reason this free and open internet is not accessible and requires several scripts to display simple html.
Posting about a free and open internet on a website which is paid for by ads and with closed content is kinda ironic but it makes a strong point about google's credibility.
Make no mistake, they're defending their business model and profit which happens to be based on internet being sort of free and kinda open.
I couldn't agree more about Google sticking up for what's best for Google. And while I don't agree that we need more government regulation and intervention, we do need to call Google on their BS.
It gets even funnier if you read between the lines on their "take action" page and translate.
Original: "A free and open world depends on a free and open Internet."
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Translated: "Google's revenues depend on a free and open Internet where we can freely monetize content created by everyone else."
Original: "Some proposals could permit governments to censor legitimate speech — or even allow them to cut off Internet access. Other proposals would require services like YouTube, Facebook, and Skype to pay new tolls in order to reach people across borders. This could limit access to information — particularly in emerging markets."
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Translated: "Who are these governments to censor what appears on the Internet? Only Google and our hand-tuned animal-named algorithms have the right to determine what people see and don't see. And how dare anyone but Google attempt to impose tolls on the Internet? Shocking, the audacity of these governments..."
Original: "Governments alone, working behind closed doors, should not direct its future."
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Translated: "Governments alone, working behind closed doors, should not direct its future. That privilege belongs to Google alone."
Original: "The ITU is also secretive. The treaty conference and proposals are confidential."
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Translated: "Only Google is allowed to be secretive. Everyone else must be open."
Since as long as I remember and probably even before that, when explaining networking to executives, marketing and other technically challenged people, we use drawings. In these drawings the part representing the internet is for some reason drawn as a cloud, probably to convey that some magic we don't want to get into the deatils happens there.
Now you've got it, the cloud, a.k.a. the internet symbol for ignorant people.
