Dr. Dre is setting up Beat Electronics in West Cork, availing from the countries “tax haven”. The Daily Shift’s Shane Burke tells us more…
West Cork has long been a place for inspiration for those in the creative arts and a place of rest for those retiring from the daily grind of the workplace. However the most recent resident to come to the area is Dr. Dre whom has relocated his business dealings in Beat electronics to Clonakility, Co. Cork to avail of Ireland’s low corporation tax rate. Dr. Dre has located his three firms to Clonakilty under the supervision of O’Mahony Donnelly accountants, a company that has experience in working with many venerable multinational firms.
Mr. O’Mahony has described his firms dealings with Dr. Dre and other multinationals as one of their ”niche markets” but has declined to describe the particulars of his accountancy firms relationship with any of their clients. The lack of details aside Mr. O’Mahony said his primary ambition was to bring clients to West Cork: “We are active in a network of international business advisers that brings us clients looking to do business here”. As was alluded to earlier in the article the primary reason for Beat electronics locating in West Cork was Ireland’s low corporate tax rate of 12.5%. To do this, the firm can move money between it’s subsidiarys and parent company in California in the form of royalty payments, or artist fees to legally reduce it’s tax liabilities. If the issue is investigated further as to why an artist would want to relocate his/her holdings from their home country we must look at the mentality of relocation.
America’s corporate tax rate as of 2012 stands at 35% well above the international average and as if to add insult to injury, many
firms face taxation on any earnings sent home as well as paying the rate of the country where earnings are made. This extra rate on repatriated earnings is usually the difference between the domestic rate of the US and where the overseas profits came from.
As taxation at the corporate level can be argued as a reason for Dr. Dre relocating his firm to West Cork, a hypothesis can be made that the move was done to make as much profit as possible for Dr. Dre personally and his companies backers which some will call
Capitalism at it’s worst and unpatriotic to his home country. However in a global market where competition is fierce, and it would be hard to argue that Dr. Dre should not seek every advantage for his firm to survive after putting so much work into setting it up and delivering a product that consumers want.
As is expected in these times of crisis and turmoil in job markets their has been many critics of off shoring. Ron Hira, an assistant professor of public policy at the Rochester Institute of Technology has said; “in regards to the anxiety domestic workers feel about outsourcing, that policy had to change so U.S. workers aren’t being forced to train foreign replacements”. Whether this quote is a cut at the workers in oversea countries who will avail of the jobs, major firms like Beat Electronics will bring to their communities the central dilemma that surrounds outsourcing, serving ones country versus ensuring the profitability of the firm they worked their lives to build is not going to abate.
For the workers who lose their jobs in spates of out sourcing the shock of their sudden alienation from the companies they helped build can be overwhelming and they can soon slide into depression at their loss of dignity that comes with unemployment. From the view point from international firms they will argue their first responsibility is to their stock holders and nobody will deny that this is not partly true as it is primarily stockholders who provide the funds to get off the ground in the first place before a single worker is hired.
From the point of view of the companies CEO, it is hard to deny that his chief concern should not be to save the firm that he gave his entire life to get to where it is today. The sad thing about business is that self-interest is the primary motivator and those with the more leverage to fufill their self interest will always survive. While greed can be good in a majority of contexts, it also hardens you to the sight of a former employee having to beg on the street to feed his family, then you know what is priceless.
These concerns aside the government has a responsibility to answer for when firms move overseas as the environment firms work in is just as much to blame. It can be argued that firms can only work with what they have at their disposal and if they cannot the only option is relocation. On the part of the layed off worker this is no comfort but the issue of outsourcing is not as black and white as people make it out to be. It is not simply the story of the big, bad, evil corporation moving abroad to make a profit, but a series of people whom it is impossible to say should not act in their self interest to safe guard what they have worked their lives to build. For these very reasons Dr. Dre’s decision to relocate much of his holdings to West Cork is understandable. Outsourcing will perhaps only end when no advantage can be made from corporation tax but until that day we will have to live with the bogey man of outsourcing.