Former Soviet Republic of Georgia To Become IT Tax Haven 153
A few days ago we noted how Ukraine is driving out its software freelancers with the threat of onerous taxation. Now comes news that another former Soviet republic, Georgia, will become a tax-free zone for IT companies. It might be the Google translation, but it seems that officials there are somewhat worried about how to categorize the IT segment: "[T]he main difficulty ... is to determine which organization is the IT company, and what is not: 'While from a formal point of view it is impossible to distinguish between software developers from the oil.'"
Re:So now our jobs go to Georgia? (Score:5, Insightful)
Re:So now our jobs go to Georgia? (Score:5, Insightful)
if we're charging higher taxes, higher labor costs, for essentially the same service why not move elsewhere?
The key there is 'same service'. All too many companies will decide that something IS the same service without taking into account factors which impact the company and the customers, all for the sake of lower taxes. Outsourcing to another country which may have another language, incompatible customs, and different labor practices and, in the case of IT, different development paradigms, may be far more costly in the long run than a lower tax rate. But that would require an understanding of IT, which most business people simply do not have, and aren't interested in learning about.
Is my source code safe in a third-world nation? (Score:1, Insightful)
I'm well aware that most outsourcing projects end up being huge disasters. It's obvious why that happens.
But even assuming it was possible for these third-worlders to develop software well (which, of course, it isn't), how can I be sure they'll respect the privacy of my source code? Will a contract alone really be enough to ensure that they don't deliver the code to me, and then turn around the deliver it to my competitors, for a fee?
Will I have to perform a complete audit of all code they create, just to ensure they haven't slipped in any back doors, for instance?
At least in America, there are laws and a somewhat-reliable justice system that can help enforce the contractual terms that the parties have agreed to. But do such institutions exist in places like India and Georgia? Not that I'm aware of. We always hear about corruption associated with such places.
So I'll continue to develop my code in America, even if it is slightly more expensive.
Re:So now our jobs go to Georgia? (Score:5, Insightful)
Taxation is merely one small variable in a big formula.
Among others are:
1. Infrastructure
2. Workforce availability
3. Culture of working
4. Political stability
5. Religious stability
6. Social stability
7. Corruption
8. Legal system
etc.
If you really believe that taxation is the biggest issue, I have a zero-taxation location for you in Somalia.
Labor is a bigger cost than tax (Score:5, Insightful)
Yeah, you have lower quality work, but in many cases it is easily offset by taxes.
Taxes are a big deal but I've worked pretty closely with a lot of global sourcing and taxes are usually pretty far down the list of why companies outsource. Labor cost is by FAR the biggest reason in most cases. Labor for most companies greatly outweighs any tax burden no matter how profitable the company becomes. Some companies locate their headquarters outside the US for tax reasons (Tyco for example) but this is getting harder.
The main thing about taxes is it punishes you for being successful. The more successful you are the higher you have to pay in taxes.
The "main thing"? Taxes are nothing more than a punishment for success? Seriously? I don't think you've ever tried to start or run a company because the REAL punishment is a company that loses money. Having to pay tax because my company is successful is a problem I welcome with open arms.
The foreign workforce is usually decently educated, cheap and willing to work long hours because the standard of living is lower.
Educated? Generally yes. Cheap? Sometimes if it can be managed efficiently (not always possible) from a long distance. Long hours? Not in the top 20 and apparently not as long as those in the US.
Someone being paid US minimum wage in the US can hardly even afford rent, the same pay gives a person "middle class" status in third-world or developing countries.
Technically true but you need to learn about purchasing price parity [wikipedia.org]. Goods don't cost the same everywhere. Also there are people who are equivalently poor in any country you care to name.
Re:awesome (Score:3, Insightful)
Re:So now our jobs go to Georgia? (Score:3, Insightful)
That's silly. It's not about the number, it's about the percentage. If you walk into a store, what's the chance that the guy behind the counter speaks English? If you hire a programmer without specifying a specific language to speak, what's the chance they speak English? The raw numbers are useless, as you stated it's a small country.
By your statement, New Zealand is a bad place for English speakers to do business because the whole country has less than 5 million English speakers, and you'll find more than that in France. It may be factually true for the numbers quoted, but is silly logic.
Re:So now our jobs go to Georgia? (Score:1, Insightful)