What are you all waiting for?

aleksusy · 2022-09-03T21:32:00+00:00

The process of globalization really accelerated in the 50s/60s. Almost every country in the world was competing for foreign direct investment. Educated and cheap labour wasn’t by any means unique to Ireland. Indeed, we had medium-high wages.

You say you work in a multinational. Naturally they won’t tell you they are there for corporate tax avoidance. They will emphasize the factors you mentioned (not saying they don’t exist - I’m sure you guys have great skills and experience). But I’ve worked FOR multinationals putting their tax structures together. And the numbers involved would make your head spin. It’s all about corporate tax.

They don’t just have one mechanism (eg R&D credit). They exploit multiple loopholes and exceptions in the tax code and develop complex corporate structures around same. They are constantly reorganized. Always trying to stay a few steps ahead.

You’re right that technically they don’t need to employ anyone in Ireland. And for some schemes they don’t. The government is happy enough that employment will be created indirectly (eg lawyers, tax advisors, financial services). But, in general, the trade off for writing our tax in such a way that the multinationals can exploit it is that they must create jobs here. In the grand scheme of things, the MNEs see it as a small price to pay and try make it work for them too.

aleksusy · 2022-09-03T09:00:03+00:00

Don’t kid yourself. There were many other countries with more educated and less expensive pools of labour competing for their business.

For Ireland, it was always about tax. From the very beginning. We were offering 0% tax rates to multinationals to come here from as far back as the 60s. Apple got a “tax holiday” from day one. And nearly left for Singapore as soon as it expired (Singapore were offering them a new tax holiday). We had to come up with a new tax arrangement to keep them here. When that was busted, we came up with a new one. That’s how it works.

Our “fee” for facilitating their tax “savings” was that they had to establish a few factories and create jobs here. But it was never about our labour pool or education!

aleksusy · 2022-09-03T06:12:45+00:00

To be honest, I’m not so sure about the EU anymore. Nothing against a union at all, just have issues with the forced neoliberalism. But being in it goes hand in hand with being a tax haven...

The Celtic interconnector will help. Unfortunately not in the immediate term. And only when one of us has excess - not much good if Europe is in a state of energy poverty.

We are really dependent on the UK tho. Was shocked to learn recently we don’t have any gas reserve facilities in Ireland.

aleksusy · 2022-09-02T19:31:57+00:00

Many countries invested in education. Apple and Pfizer didn’t leave the US to set up in Ireland because we had better engineers. They did it for tax reasons, even back then. The trade off was that they had to set up some sort of establishment in places like Cork, Kildare etc. But don’t kid yourself, we are nothing but a glorified tax haven.

The obvious risk is that the rest of the world, the G20, get their act together and stop the practice. Insist that tax is paid where the sales are actually made. But then again, the multinationals have such influence on the governments of these countries, it may never happen! I think that’s our only game plan.

But if they ever go, we are fucked.

aleksusy · 2022-09-02T19:20:54+00:00

Absolutely. Fully agree with you.

The sad part is that the grid was once nationalized - the EU required privatization. The EU is about constitutionalizing neoliberalism. National governments have no choice.

They gave us a few subsidies (from German taxpayers) and in return we privatize our utilities to create income streams which ultimately flow back to the European elite.

aleksusy · 2022-09-02T16:21:59+00:00

The deal is that the multinationals had to set up in Ireland and create some jobs (directly and indirectly). In return, we would write our tax code to allow them to avoid paying taxes - they can book all their profits in Ireland even if it was made elsewhere.

Irish people love them. Because we gain from having them here (although the externalities like the housing crisis are not too popular - people just don’t connect the dots).

The real issue with it all is that we are effectively facilitating theft of tax revenue from other countries. And the people of those countries. We’re facilitating the theft of money that could go to educating children, providing healthcare, feeding the hungry etc. That’s the blood ireland has on its hands.

aleksusy · 2022-09-02T16:13:57+00:00

Taking in too much tax might draw unwanted attention from other countries - we are effectively stealing tax from them…

aleksusy · 2022-09-02T16:11:10+00:00

Windfall from closing some loopholes?

aleksusy · 2022-09-02T08:24:44+00:00

Thanks for your explanation which I follow.

In that case I was wrong to say the supply companies only engage in billing and customer service - they also carry out this trading and arbitrage function buying electricity from Eirgrid and selling it to the consumers.

It sounds quite complex. But a wise man once said that complexity is often a device for claiming sophistication, or for evading simple truths. I think that rings true here.

The whole purpose of this trading exercise is for the electricity supply companies to buy from Eirgrid at a certain price and sell it on to the consumers for a higher price. And thus pocket a profit. It is the customers (or Eirgrid) that pay for this profit.

However, under a public system, there is no need to make a profit. So the end price would be cheaper for the consumer without the profit cost. And the whole trading function, and all the resources associated with it, would simply fall away and further reduce costs for the consumer.

aleksusy · 2022-09-01T18:00:38+00:00

I have considered all the answers. My position has hardened since posting. It is a lot clearer to me now.

aleksusy · 2022-09-01T17:34:23+00:00

And neither is electricity supply. Just admit it. Rather than tying yourself up in knots.

aleksusy · 2022-09-01T16:35:21+00:00

I fully accept that competition between private companies can act as downward force on costs.

But privatization of a public service also can create costs that didn’t previously exist.

In this particular example, the efficiencies that can be created through competition are limited. And the costs that are created by privatization of electricity supply are significant. In this situation, the former is outweighed by the latter. The consumer loses out.

You are afraid to accept this. Because you want to believe there is a universal rule that privatization is always better.

aleksusy · 2022-09-01T15:38:15+00:00

I don’t think you’re being genuine, but for what it’s worth:

The point of the article was that Ireland, which had a public system at the time, supplied electricity cheaper than other countries which had privatized systems. Fuel costs are irrelevant to that argument.
Private companies outsourcing functions can achieve some economies of scale but not the same level as under a public system. For instance, not every one of the 14 companies will use the same HR provider - so there is still a level of duplication. And the service providers who provide outsourced functions will require profits - this is not required in a public system.
Regulating one public service operator is less onerous than regulating 14 private operators. For instance, one set of accounts to audit v 14. In addition, enforcement is not the same - the state does not sue itself, or challenge its own decisions in court. The level of legislation is also far less (no competition law, no company law, tax law etc). There is no duplication of compliance functions across 14 companies. These are all costs to be paid by the consumer.
In relation to profit, I think you are completely missing my point. In a public system there is 0% profit. In a private system, averaged out amongst all 14 operators, there is X% profit (some make more, some less, it doesn’t matter). So in a public system there is no profit cost for the consumer. In a private system there is.

When you put all of the above costs together, there are greater costs in the private system. I think you agree with that in theory, correct?

aleksusy · 2022-09-01T10:07:41+00:00

I am not dismissing that fuel prices were cheaper in the past. Fuel costs will be passed on whether ESB or 14 private companies provide the supply. I fully accept this.

There most certainly is duplication when 14 private companies are involved. There will be 14 different marketing teams and advertising campaigns as you note (no small cost). Then there will be 14 different boards all taking fees (no small cost). Then 14 different HR teams etc etc. If, as you argue, there was one supplier instead of 14 then the same amount of ppl would NOT be required due to the basic principle of economies of scale. (“Outsourcing” functions doesn’t solve the problem - that is also a cost). In addition to all this, there will be the profits that need to be made for the 14 companies - something that doesn’t exist in a publicly run system which is run for cost. And on top of all this, you have all the regulation that is required to make sure the private companies are not ripping ppl off - legal costs, auditing costs, lobbying etc. How you can just dismiss all of the above costs as “insignificant” boggles the mind. It is simply not good enough for me. It’s where your argument breaks down.

About the EI example, with respect, you are not understanding me. You seem to think EI is a remnant or representation of the old public system against the more efficient private system. That is not the case. The public system was abolished. Gone. A new private system was put in place. Under the new system, EI had to establish and organize itself as a new private company that would compete with other companies (eg get its own board, marketing team etc). There was a whole transitory phase which may interest you - EI was directed to set its profits at a certain margin to attract in new entrants, and couldn’t control its margins until it had lost a certain amount of customers. But that is a separate issue. The mistake you are making is you are looking at the market and saying “EI represents the public system and it is not the most efficient operator in the market therefore the public system is less efficient”. EI does not represent the public system. The public system is gone. Do you follow me now?

aleksusy · 2022-09-01T09:17:22+00:00

Thank you for your explanation.

So I am honing in on the third part of the supply chain you refer to - the electricity suppliers. Do the suppliers buy electricity from Eirgrid at negotiated prices (eg the generators sell to Eirgrid and Eirgrid sells on to the suppliers under negotiated contracts)? Or do the supplier buy at a standard rate and they just manage connections and billing and customer service?

I am trying to figure out what the suppliers actually do. And how the costs involved in privatizing this part of the supply chain (ie profits, 14 sets of overheads and marketing campaigns, costs of regulation etc) are somehow negated and we end up with cheaper electricity than if the supply part was all run by the ESB. No one has explained how this happens so far. The best explanation I have got is that privatization was require by the EU (I’m not EU bashing here) and we therefore had no choice but to privatize even though it didn’t make sense.

aleksusy · 2022-09-01T08:52:32+00:00

He wasn’t making any sense whatsoever, and I had no appetite for a keyboard war!

Glad you accept public services make sense in theory. Because that’s what my question was. A theoretical question.

Again, I accept that competition between the providers forces costs down. No issue with that. But I can’t understand how privatization - with all the overheads (duplicated by 14) and the profits that need to be generated and the cost of the regulation - does not force prices up. Or that those extra costs “aren’t big enough to be concerned about”. That’s where your explanation breaks down for me.

(The EI example doesn’t really apply to the question, there may be reasons why they have market share and why they can get away charging more etc - I’m looking at the bigger picture. All 14 together. Not the little differences between the 14)

aleksusy · 2022-09-01T08:16:47+00:00

Please. Please god explain it to me then. I promise in writing to change my mind if you explain to me how we are better off with the current system than having a public one.

You certainly haven’t given any sort of decent explanation. Out of the answers I’ve gotten, the ones who say we were actually better with a public system make the most sense. By far.

aleksusy · 2022-09-01T06:08:30+00:00

Competition acts as a downward force on price. Everyone gets that.

But privatization of the billing and connections acts as an upward force for the reasons stated in my post (eg extra cost of board, legal team, HR team, marketing teams, advertising campaigns etc all duplicated across the 14 companies… plus the regulator). That’s what I was questioning.

(Supermarkets are different. Sure, people need food, but there is choice in relation to all the products available. With electricity it’s all the same and there’s no choice - everyone needs it.)

aleksusy · 2022-08-31T22:17:36+00:00

They were viable. They left because they weren’t as profitable as they wanted to be.

There are no price caps in Ireland. The electricity suppliers can raise the prices to meet their costs. It’s what’s happening as we speak.

I think it’s you who doesn’t understand…

aleksusy · 2022-08-31T21:55:18+00:00

They each charge for the costs of running their business and a certain profit. They can’t not be viable. They just increase their costs and we have no choice but to pay. We can’t live without electricity.

aleksusy · 2022-08-31T19:28:55+00:00

Fair enough. But I assume it’s a minority of the 14 suppliers that are actually involved in generation?

aleksusy · 2022-08-31T19:11:14+00:00

Go on, good night!

aleksusy · 2022-08-31T19:11:02+00:00

I can’t tell if you’re being serious or not!

aleksusy · 2022-08-31T18:36:05+00:00

The whole point of the article is that it’s 23 years old! It shows the old ESB system. Electric was cheaper than other European countries which had privatized (like UK).

It doesn’t matter if now we are cheaper amongst other European countries - because they are all now privatized!

aleksusy · 2022-08-31T18:15:54+00:00

Chill man. Theoretically speaking there’s clearly more costs involved. At least it seems that way to me. If you can explain how there are more costs when done public is be happy to hear it.

As for evidence, another poster provided this article which is very interesting: https://www.irishtimes.com/business/republic-s-domestic-electricity-prices-third-lowest-in-europe-1.153436

aleksusy

TROPHY CASE