The New Breed of Tax-Friendly Companies and the Outstanding Talent in Ireland

https://www.linkedin.com/pulse/20140707120342-11027096-the-three-keys-to-unlocking-the-sharing-economy

Companies that make up the young "sharing economy," including Uber and Airbnb, have created various legal complications for the government since their rise to popularity. These firms provide a useful service and reliable income for many users. Behind the surface of the apps, however, they are joining the group of corporate giants that exploit the global economy stemming from the U.S. out of large amounts of tax revenue, and they can do it even easier than the asset-heavy businesses that currently make up most of the market.

Uber has set up a very elaborate scheme to avoid paying taxes on nearly all of the rides that take place outside of the U.S. The revenue is recognized based on where the intellectual property is, and through a large amount of subsidiaries and paperwork, Uber shifts money around in the form of royalties through Ireland, the Netherlands, and Bermuda, where the tax codes are very favorable. Airbnb has joined the party with very similar tricks. David Kocieniewski quoted an interesting Australian hearing that took place in November 2015 on Bloomberg Businessweek in a post titled "The Sharing Economy Doesn't Share the Wealth." Representatives from Uber and Airbnb attended the conference:

The Australian Senate called local managers to testify alongside Uber in November at a public hearing on corporate tax avoidance. Sam McDonagh, Airbnb's country manager there, testified that taxes never motivate the company's strategic choices. "The No. 1 reason we located ourselves in Ireland was for access to great talent," McDonagh said. The response from one of the senators: "Come on!" 

No offense to Irish employees, but that laughable statement from Sam McDonagh portrays how the company plans to affect the global economy as its growth is solidified through the profits they deceptively keep. It also negates another statement from an Airbnb spokesman Nick Papas, stating "When we make long-term business decisions, we act in the best interest of our community." Airbnb shields almost all of its profit from the country where they actually rented. If they are acting in the best interest of local communities, a good start would be paying taxes to the communities' governments that provide the basic services they benefit from. Uber, as the other main example, should pay its fair share for safe roads that governments' tax revenues provide.

If it's not the U.S.'s revenue being lost, it's taxes that should have went to another government where the service took place. Furthermore, these companies are taking a lot of business out of more industries that are less susceptible to tax tricks, like traditional taxi cabs and hotels, to fuel their growth. Uber has 10 subsidiaries in the Netherlands that share one address. There is no way to argue any income should be associated with a location based on a bunch of paperwork and an office, as opposed to where the service is being performed or where the company's intellectual property was created.

Whatever the solution may be, whether it leans in favor of the U.S. or local countries participating in the growth of the sharing economy, this outbreak of paperwork and subsidiaries ruling the tax revenues that governments collect cannot continue to be the status quo of corporate taxation. All around the world these firms deceive governments, and in turn, the people. At least the outstanding talent in Ireland has something to show for it.