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In Ukraine, IT Freelancing Under Threat
An anonymous reader writes "According to the new tax law (Google translation; Russian original) that is being developed now and should take effect on January 1, 2011, it will not be possible for a private Ukrainian entrepreneur to provide any services to foreign companies without becoming a full-fledged company with a dedicated bookkeeper. Currently it is possible to perform such services and pay the equivalent of $25 in tax. Instead of raising the tax (which is overall welcomed by the community), the legislators plan to outlaw ISP, e-commerce, and Internet-based services — along with any services provided to foreign entities — for individual entrepreneurs. So starting in 2011, freelancers in Ukraine will have several choices: stop doing freelance work, start working illegally, become a full-fledged company subject to multiple cumbersome rules for taxation, or leave the country."
Well, no surprise here. Governments want to get a piece of the Internet. This will drive up outsourcing prices, which drives up the market value of us programmers here in the U.S., at least a little bit.
As a ukrainian I can easily guess which option my fellow citizens will choose. And I'm not proud of it...
May Peace Prevail On Earth
The man is killing the country so he can kiss Putin's ass. Kills me. :(
The US government tried 'policing' Al Capone to little effect. Tax evasion was what brought him down.
Lately Amsterdam has seriously 'cleaned up' its red light district in much the same manner. For a synopsis you can get a pretty good idea by reading the web page of Yab Yum, the 'leading' brothel, back in the day. http://en.wikipedia.org/wiki/Yab_Yum_(brothel), or just google it.
Bottom line is: The city wants to audit your books. Which stands to reason money laundering is unacceptable and will not be tolerated.
Anyone doing any kind of legitimate business knows this, and knows the costs and effort required to maintain audit able records. These people expect nothing less of other businesses. It seems a reasonable expectation of anyone doing any kind of legal business, and keeps a level playing field, among the tax base.
You can't be ahead of the curve, if you're stuck in a loop.
The traditional rights of workers were won with aggressive, sometimes physically dangerous collective bargaining. When you don't do that, management assumes you're a pussy. That's why it's traditional in the US to exempt programmers from every labor law.
But convincing programmers they need a union is like trying to convince cats to knit a sweater. Oh, and you have to use a ball of catnip-laced yarn. You'll get something, but it won't be a sweater! All in all, though, with the cats you'll end up with a better final product and less tooth marks.
Watch.
not to knock Germany, but you don't have lots of freelancers compared to Ukraine.
I hire Ukrainians all the time. I've never hired a German. (and I'm of German descent.) I've never even had a German freelancer bid on my projects @ 99designs, elance, guru, etc.
Most of EU still has not realized that high taxes kill entrepreneurship, and thus kill the economy. lowering taxes grows the economy and thus increases the tax base -- but having a sizeable tax base is not nearly as important as having a sizeable economy, so better to err on the side of caution and cut taxes and entitlements where possible.
To be fair to Germany (I'm half German), I rent about 10 servers in German datacenters, but that's in a big datacenter company. It's harder to find the sort of one-person shops (like mine) that are common in low-tax countries and/or rapidly growing countries like India and Ukraine. If Ukraine does this, it's to their overall detriment, I can assure you. If anything, they should CUT freelancer taxes to encourage foreign investment and create more jobs. If my price goes up, guess what... I just won't hire any more Ukrainians -- there are plenty of other hungrier people in hungry countries.
This is reality. This is business. If government stifles business, business leaves (as it should) and the economy shrinks and hopefully those idiots get voted out. If government invites business, economy grows, people get jobs, and (almost) everyone is happy. It's either a positive cycle or a negative one. Business needs government -- but government need business.
Too bad I can't hire my own government services (or not, as I choose and can afford). I'd probably hire more polite public servants. It'd be great if there were cooperatives I could join (or not, if I chose not to) that would provide roads, schools, security, libraries, etc. Even better if those cooperatives competed with each other for my business. Kind of like a Home Owner's Association in the U.S. or something like that.
I hire Ukrainians all the time. I've never hired a German. (and I'm of German descent.) I've never even had a German freelancer bid on my projects @ 99designs, elance, guru, etc.
Could this be due to the fact that what you're offering might be financially interesting for Ukranians, but isn't worth getting out of bed for for those us in Western Europe?
This is reality. This is business. If government stifles business, business leaves (as it should) and the economy shrinks and hopefully those idiots get voted out. If government invites business, economy grows, people get jobs, and (almost) everyone is happy. It's either a positive cycle or a negative one. Business needs government -- but government need business.
Or...we already have jobs and the piddly sum you're offering to do your project isn't interesting to us in our little "cradle to grave welfare states".
Don't get me wrong, I firmly believe that your ability to solicit work online and get reactions from all over the globe is fantastic and of long-term benefit to everyone. To turn that into the usual small government argument is taking it a bit far however. Ukraine is a good example of a disfunctional government, not one to be upheld as a shining beacon for libertards everywhere.
And for the record, my country (the Netherlands) has been actively working to make it *easier* for 1 man shops to do their thing, resulting in tons of them popping up. Some of them are good, some of them are awful, but there's nothing to stop them from making it big.
People replying to my sig annoy me. That's why I change it all the time.
So basically you want to say that low taxes lead to economy growth and less tax evasion?
Well, Ukraine is the best counterexample. Flat 17% income tax, but pretty much nobody pays it and the economy is in ruins.
And all that despite Ukraine having great premises for agriculture, lots of natural resources and also despite it has inherited an enormous chunk of the Soviet industry.
You see, most corporations and many people will try to evade taxes no matter how low they are.
"It's such a fine line between stupid and clever" -- David St. Hubbins, Spinal Tap
There's a reason for this. The US Constitution prohibits the federal government from doing a lot of different things. Back during the Great Depression, for example, FDR pushed through the alphabet soup of regulatory agencies, and a number of them got overturned by the supreme court, since they were stepping outside the constitutional limits. A supreme court justice sent a note to FDR telling him he was missing the obvious point: the federal government controls taxation, and so could use that to make the changes he wanted to make, constitutionally.
So what's happened is the tax code has become a proxy for being able to pass laws that other countries can at the national level. Taxes (and the commerce clause) are the engine for politicians trying to control our country, and as a result you have a tax code longer than the entire corpus of laws in most countries.
It also leads to an IRS that can basically act with impunity. A company I used to work for got audited, and the agent started off by summing all the deposits made into the company accounts as "income" to provide a "starting point for negotiations". This included TRANSFERS of money between accounts, and so the "starting point" for taxes worked out to be more money than the company made in a year. They complained to the agent's supervisor at the IRS who said, in essence, well yeah.