Like Google and Facebook before it, Twitter is opening an international office in Dublin. There's some debate over whether or not it will be a formal European headquarters, but Ireland is bragging about winning the battle over Europe's two other top tech towns, London and Berlin. The country's jobs agency, the Industrial Development Authority, broke the news in a tweet that started with a telling joke: "Ireland is trending."
It's true. Over the past few years, Ireland has worked hard and succeeded becoming Europe's tech hub. The Guardian reports that "IDA is trying to make Dublin the social media and online capital of Europe." Google helped start the trend by opening its international headquarters in Dublin in 2004. Others followed and Dublin now hosts hundreds of employees from Facebook, LinkedIn, Zynga, PayPal and eBay. Google alone has over 2,200 employees in Ireland's capital. But besides the adorable accents, what's the draw? "The simple fact of the matter is that Ireland remains a low-corporation tax country in Europe, and is in the top 10 of European countries in terms of ease of starting a business according to the World Bank," says Mike Butcher at TechCrunch Europe. "It's also English speaking, has a highly educated population and since the property bubble burst, it's much cheaper to locate an office there."
It's also cheaper for American companies to run their international operations in Ireland. At 12.5 percent, Ireland's corporate tax rate is less than half that of neighboring United Kingdom, but as The Guardian's Lisa O'Carroll explains that number is more of a red herring than real savings. Thanks to a strategy called the "Double Irish"--not to be confused with the continental version, the "Dutch Sandwich"--companies headquartered in Ireland benefit from the country's generously low "transfer pricing." Take Google for example. "The search engine is using Ireland as a conduit for revenues that end up being costed to another country where its intellectual property (the brand and technology such as Google's algorithms) is registered," O'Carroll reports. "In Google's case this country is Bermuda, according to an investigation by Bloomberg last year."
The Double Irish "very common at the moment, particularly with companies with intellectual property," Bloomberg reported last year. It's not hard to see why as Google trimmed their overseas tax rate down to 2.4 percent last year with the strategy, just one of many "international tax benefits that boosted its earnings by 26 percent last year." Of course, as policymakers--especially Irish ones--are careful to explain, there's nothing illegal about any of this. Furthermore "Ireland is not quite like Luxembourg," O'Carroll says. "Companies have to have fully blown operations in the country to take advantage of the tax-friendly arrangements."
None of this is to say that American accountants are happy about the habit. "[Google is] flying a banner of doing no evil, and then they’re perpetrating evil under our noses," professor emeritus of accounting at Baruch College Abraham J. Briloff told Bloomberg. "Who is it that paid for the underlying concept on which they built these billions of dollars of revenues? It was paid for by the United States citizenry."
This article is from the archive of our partner The Wire.