Dublin down

The reason American tech firms like Ireland isn’t just the low taxes

September 13, 2013
Obsession
Borders
September 13, 2013

Airbnb, the accommodation rentals website, just became the latest American tech company to set up its European headquarters in Ireland. It joins Google, Facebook, Adobe, LinkedIn, Apple and countless others on an island that is colder and wetter even than its British neighbor.

In a blog post announcing the news, Airbnb CEO Brian Chesky explained that “Dublin has hospitality in its DNA… The city has a reputation for being one of the most hospitable and friendliest places in the world.” Ah, to be sure! But more to the point, Ireland’s corporate tax rates, at 12.5%, are the lowest in Europe. By contrast, corporations pay 23% in Britain, 29.6% in Germany and 33.3% in France. The European Union’s single market is structured so that a company with headquarters in one country is subject to its rules while conducting business across the continent.

The real reason is regulation

But there is another reason American tech firms flock to Ireland: light-touch regulation. Since the same rules that govern taxes also apply to regulation, companies can seek adjudication under laxer Irish standards even when the complainant is from another country in Europe. The Irish Data Protection Commissioner has a habit of issuing findings in favor of American tech firms—notably in two audits (pdf) of Facebook triggered by a campaign by Max Schrems, an Austrian law student. Most recently it found nothing wrong with the transfer of data by Apple and Facebook from Europe to the United States, despite worries that law-enforcement agencies might more easily get their hands on the data there.

Ireland’s antics have not gone unnoticed. In July, Angela Merkel indirectly called out Ireland (paywall) for its weak laws, arguing that Europe needs uniform—and strict—data-protection rules rather than letting companies adhere to the laws of wherever they happen to be headquartered. Viviane Reding, a high-ranking European Commissioner whose most ambitious policy so far has been new privacy regulation that would do just what Merkel wants, also chimed in her agreement.

Yet Ireland remains unperturbed. In an interview with the Financial Times (paywall) the day after Merkel’s statement, Ireland’s data-protection commissioner said he agreed with the notion of a “one-stop shop” for pan-European regulation—so long as that shop is in Dublin.

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