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Summary:

Twitter is opening an office in Dublin, which has become notorious as Europe’s haven for American technology businesses, thanks to its lenient business taxes. But can a new program in London tempt engineers to join new startups, rather than the big names?

Twitter fail whale, cc licensed by Flickr user Ghoseb

Twitter fail whale, cc licensed by Flickr user GhosebA couple of years ago Twitter co-founder Biz Stone told me that the company was keen to stay small: “maybe we can be a company of hundreds and still bring Twitter to a huge number of people around the world.”

Stone, of course, is no longer at the company, and it seems the vision he outlined is long gone, too. Boosted by hundreds of millions of dollars in funding, and 100 million active users, the company has been on a relentless expansion plan recently, including starting operations in Britain and Japan.

Monday, Twitter announced it was going further, by opening another office in Ireland. The news was confirmed with a brief statement pointing out that Dublin would be “our third location outside of the U.S.” and was “a great next step in the company’s global expansion.” It’s said to be the heart of the company’s forthcoming internationalization efforts.

So why Ireland?

There is quite a lot of talent in and around Dublin, across important areas such as software development and sales and logistics, but the real reason that Twitter’s gone to Ireland is simple: money.

One of the quirks of European integration is that different countries have different corporation tax rates, and businesses can set themselves up in one country and channel revenue there from others. Ireland has a 12.5-percent corporation tax rate, as well as laws that allow large businesses to easily shuffle money off to tax havens where the situation is even better. This makes it very attractive as the place for non-European businesses to set up their European headquarters — even if it’s not always popular with the rest of the continent.

Google, for example, has received intense criticism for using Ireland as a sort of tax haven: a situation that means it has paid just $12 million in corporation taxes in the U.K. despite having multi-billion dollar revenues.

The topic was addressed recently by Eric Schmidt, who said that of course he’d love Google to pay more tax, but tax laws are too weak, which means the company is obliged to exploit them. That’s creating shareholder value for you.

But while I’m sure Ireland — which is one of Europe’s most troubled economies — is largely happy to see any jobs arrive on its shores, not everyone thinks that tempting in foreign businesses with low taxes is the way to make the Irish economy sustainable in the long term.

Over on Google+, Dermot Daly, the founder of Dublin-based mobile app developer Tapadoo, asks whether it’s good enough to simply be part of the support layer for multinationals:

I used to think that when U.S. companies chose Ireland as their European HQ, this was a great thing. High quality jobs, large employment etc. Then I worked in one. Doesn’t matter which one. Here’s what I did see; there were a lot of high paid jobs in it, however the vast majority of them were not working on what one may call “core.”

In fact most of the Irish operation were involved in localization, or employed in the company’s support organization. Not direct support, but support all the same… the attitude was if it was important, it should be done in the U.S.

This tension between jobs that are a core part of a company’s innovation and jobs that are merely part of the sales machine is something I’ve highlighted before. In fact, when Twitter first started building out its London office, I asked whether it wanted to genuinely be part of the local culture — hiring developers, making products — or whether it simply saw Europe as a rich sales and marketing opportunity.

I think the evidence is pointing towards the latter. The U.K. Twitter blog has recently featured details of its first localized advertising, its links with London Fashion Week and marketing use by Burberry.

At the same time, the question of whether Ireland is best-served by low corporation taxes continues to rage. After all, its aggressively low corporation tax helped build the economic growth known as the Celtic Tiger — but did little to stop its precipitous descent during the financial crisis. (There’s a great piece by Michael Lewis if you want an overview of what happened).

Faced with all of this, there seems to be a single question. If the brightest technology companies are making their decisions based around tax havens, rather than talent hotspots, then how can Europe’s startup scene go about creating good jobs for itself?

London’s Songkick thinks it may have the answer, with a program it calls the “Silicon Milkroundabout.” The company — which we recently listed as one to watch in the GigaOM Euro 20 — is championing events that help university graduates, many of whom are tempted by jobs in finance or big technology firms, realize that jobs in startups are a viable option.

In particular, it’s intended as a challenge to the practice of big businesses touring around universities and trying to hook graduates, which is known as the “milk round.” Songkick CEO Ian Hogarth is encouraging startups and younger technology companies to work harder to appeal to graduates, to help them understand that there’s more to life than safe corporate work.

“We, along with many of our friends from other startups, struggle with the shortage of computer science graduates and experienced software developers.  The fact is that many potential candidates aren’t even aware of tech startups as an alternative to the more traditional routes of working for a bank, a consultancy, Google, Facebook or Microsoft… Growth in the start-up sector is leading to the creation of new jobs, and by working for a start-up you can directly make a greater contribution.”

The group — including companies we’ve written about before such as Artfinder, Adzuna and Last.fm — has set up a jobs fair next month with 500 posts up for grabs.

Five hundred jobs may not seem like much in the great scheme of things, but these are jobs that pay back straight into the local economy, so perhaps it’s a start.

Twitter photograph used under Creative Commons license courtesy of Flickr user ghoseb

  1. i am pretty sure that twitter is going to ireland for the double irish tax loophole…just like google and many other major tech companies…..

    http://en.wikipedia.org/wiki/Double_Irish_Arrangement

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  2. Will bring several new jobs, but if you know how to use tweeter you will have big business benefit from it.

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  3. Ireland has many advantages but, tragically in terms of Internet innovation, the development of the population’s Internet sensibility was crippled by the actions of the monopoly Telecoms provider, Eircom, which had been privatised just a few years before the advent of DSL. The introduction of broadband was delayed by several vital years as, behind the scenes, Eircom faced off against the government, insisting that they be allowed to charge over a hundred pounds per household. The government knew this would be a huge political problem for them as voters would be aware of how much cheaper broadband was in the UK but the government did not have the stomach to play hardball and Eircom were determined not to cannabalize their existing lucrative ISDN business.

    The saddest part is that Irish taxpayers had funded a massive upgrade of their infrastructure because the government wanted to “fatten up” the state monopoly company to ensure a successful sell-off that would appear to support their idealogical agenda and pave the way for more privatizations. This meant that, technically, Ireland could have had the best broadband in Europe and, with it’s highly-educated and natively English-speaking population, had a huge headstart in developing an Internet sensibility, leading to a wave of Irish successes in the run-up to the Millenium, but we blew it and, frankly, Ireland now has the support and localisation role it deserves. That may sound harsh but think about it: do you know of any truly innovative Web companies? No, because our population missed that boat and will now always struggle to catch up.

    I was one of the privileged few who fell in love with the Web thanks to being exposed to high-speed Internet in college but, upon graduating in 1997, there was no way for us to replicate that access in our own homes. More importantly, teenagers a decade younger than us, the Irish contempories of Mark Zuckerberg, were missing out on the whole thing.

    I ended up immigrating to The Netherlands specifically because, having experienced it, I knew how important the Internet would be and did not want to wait any longer for broadband. I never moved back to Ireland, even during the “Celtic Tiger” boom, because I could see that it was nonsense, that with no real innovation of it’s own, Ireland was just an international tax scam masquerading as an economy, a small island whose natives were collectively brain-washed into believing that prosperity would be an eternal circle of selling houses to each other at evermore ridiculous prices. Now, most of my friends in Ireland have meaningless jobs with American corporations that they hate but can’t leave because they have massive mortgages that are way more than their houses are worth. People literally cannot afford to leave those jobs and take a gamble on starting or joining a startup – the Irish could not have more effectively screwed their future potential even if they were trying, but it does mean that any corporation considering a base in Ireland is guaranteed to have a good supply of compliant employees who won’t leave to do their own thing.

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