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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."
...individual entrepreneurs need to seek the a tax adviser and foreign or e-commerce based services are outlawed.
So what's the deal ? The situation is then similar to Germany, with the exception that the adviser is not mandatory but practically indispensable (even for freelancers) since the German tax system is the most complicated in the world.
And I can assure you that there are lots of freelancers in Germany.
Is this really such a big deal?
From my understanding there are many countries in the world that requires a registered commercial organization (and all the required administration that follows) to perform certain kind of jobs.
Perhaps sad for the Ukrainian people that working internationally becomes more cumbersome but I can also understand that the state want to keep track of what business is conducted from the country.
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
They will work illegally. No big deal. That's what any intelligent citizen of any country does when their lawmaking weasels start cranking stupid laws like that.
The man is killing the country so he can kiss Putin's ass. Kills me. :(
The problem is that the majority of Ukrainian freelancers already work illegally.
Corporate entities have a far higher tax payment rate than individuals, especially in the internet sphere where freelancers don't have physical office space or physical deliverables that can be tracked by authorities. Furthermore, individual entrepreneurs providing internet-based services in Ukraine make it hard for the tax-paying corporate entities to compete.
This has become important because Ukraine is set to receive from $19-20 billion from the IMF in the next two and a half years if they can show that they are making progress in reducing their budget deficits, so there's a lot of incentive to try to push tax payments up.
In Soviet Russia, outlaws work for YOU!
I work in the UK as a freelancer in IT and I need to have my own company, pay taxes and have an accountant.
I used to work in Holland as a freelancer in IT in there I needed to ... you guessed it ... have a company and an accountant.
Even if you don't want to have your own company, there are in fact schemes like "Umbrela Companies" which are in fact accountant managed companies who will temporary "employ" the freelancers and pass them all the income from their contracts minus tax and their part of corporation costs. These are however less tax efficient (you are taxed as an employee and income usually pays more taxes than dividends or capital gains) than just having your own company.
I'm sure Ukraine has some smart accountants who would love to setup some scheme like this.
Somehow I suspect that the real concern here is that freelancers will have to start paying real taxes like everybody else (my hearth weeps) instead of getting their roads, schools and law-enforcement for free.
if you are already doing freelance work, it means you already have connections, resume, and the experience to show for it. leave the country. that will teach them, VERY badly.
Right... so, let them eat cake, basically.
It's difficult to move even to a different city in Ukraine (you need a residence permit). As far as going to work in a different country, the entire international system is basically designed to prevent that. And it's not as if the world is your oyster... Your choices for visa-free travel as a Ukrainian are the former Soviet Union (except the parts that are now EU members) and that's it. You can pick up temporary visa's in-country in Egypt, Syria, Jordan, Thailand and Vietnam.
And nobody gives work visas for freelancers, so you'd be working illegally anyway.
Shhhh. The former Soviet states are now shining examples of capitalism. Pointing out that internal passports are still required (and that pro-Western governments are so hated that governments which implements these sorts of laws are voted in democratically) ruins the dream.
I may be comparing apples to oranges, but...
The IRS costs apx $12 billion, has 1142 "Forms and Instructions" (most seem to be forms). The law is reported to be 3,387 pages itself accompanied by 13,458 pages of regulation spread across twenty volumes.(http://www.trygve.com/taxcode.html)
And that's just the federal tax code. We also must worry about individual state and local tax codes, many of which are nearly as bizarre and convoluted as the federal ones. Definitions frequently differ between the IRS and state agencies.
I won't join Slashcott. OTOH, If Beta goes live, I just won't be back until it's fixed. Sorry Dice.
If you follow MY ideas to the ultimate conclusion, then you'd have a working economy that could not be destroyed by state money manipulation and you'd have no wars that are funded by states that only benefit the largest players while destroying lives of people and nations.
I am not an anarchist, I am not interested in Somalia. I believe states have one real purpose: justice system, a court system and a punishment system to punish transgressions, such as harm done to individuals and to public property and environment.
In my world no company would get any public funding at all. There would be no income tax at all. There would be sales tax, which means that consumption is not encouraged, but production is and that is the real wealth, not fiat money.
In my world states would not have money to run wars of opportunity. In my world businesses could not own governments because governments would have very limited function: justice and punishment, which is much easier to control than all of the stuff governments do now.
In my world there would be no regulations against business, but in my world any business or individual hurting other individuals or public property (environment) would be punished severely both materially and criminally.
What do I do to live by my principles? My affairs are spread out between countries, bank accounts are where it suits me best, business is where it suits me best while I make any purchases again, in places that suit me best. It's about optimizing the life to get out of being a state slave.
You can't handle the truth.
Have fun with that. Good thing it only exists inside your crazy little head.
- oh, you are wrong, not that my head is that big, but you are wrong that corporations do not own the governments today in a way that they couldn't tell government to fuck off today.
You will see how BP, who is getting funded by governments of the world, who got to be the monopoly it is by getting help from UK and US governments even in such things are killing off democratically elected government of Iran in the 1953 I believe, that company will end up telling the US government to fuck off and rightfully so. Government that treats oil as if it is heroin, setting liability limits for companies that can do massive damage (75 million? that is the FUCK OFF) Government that pays hundreds of billions to such companies in contracts while getting almost no royalties? That IS the FUCK OFF.
Government that literally has people having sex with BP personnel, taking bribes, having drug parties together? That is the FUCK OFF.
Government will bend over and take it in the ass while talking smack. Individuals in government will not go against large corporations, they know not to bite the hand that feeds them.
At the same time the corporations like BP provide better security nets for people who have pensions in such companies than governments. Of-course in this year BP will have some trouble, but trouble will go away in a year or two, they'll manage.
--
Governments are owned by the banks. They are owned by the military industrial complex. They are owned by manufacturing complex. They are owned by mining companies. They are owned by medical/pharma companies and they are owned by Insurance companies etc.
All of this is precisely because governments' hands are in all of these pies through 'regulations' and various tax schemes.
Governments are slave owners and people are the slaves. Get over it and do something about it not to be one.
You can't handle the truth.
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." - Judge Learned Hand
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
And it has been so for a long time so, unfortunately, there isn't much of a freelance IT industry around here.
The problem people from countries such as the US and the UK don't seem to understand is that setting up an actual company in Brazil (and I imagine Ukraine to be similar) is that it's a HUGE hassle. By that I mean it's a 2-3 month process, involving more than 10 different government institutions you need to visit in person. You need to get a proper "commercial address", which can't be your home (unless you re-register it as a commercial building, which is another hassle and pays much higher property taxes).
When I worked as a freelancer, I did the math and I would pay about 25% of my earnings in fees and accounting. Then, I would pay income tax (progressive scale which tops at 27.5%) on the remaining 75%. Also, as a freelancer, I would need to pay 20% to social security instead of the regular 11%.
In short, I would end up with roughly ~50% of what I earned. Then I would proceed to buy goods which were already taxed to hell and my purchasing power would be effectively cut in half again (the cheapest Honda Civic here costs US$37K).
I just restricted to working only to foreign companies. The pay was better *and* I wouldn't need to register myself as a company to do that, as the tax code has general provisions for "money from foreign countries". The consequence is that it was very difficult to prove my income whenever needed (home financing, etc), as everything here requires a "regular" proof of earnings.
From my personal experience, I can say that, yes, this is bad news for Ukrainians.
In my world no company would get any public funding at all.
In your world there would be no corporations, only cooperatives and partnerships. There is absolutely no basis in libertarian political theory for the existence of corporations, whose primary purpose is to allow groups of individuals acting under the rubric of "a corporation" to do something that no individual acting alone, in partnership, or as part of a cooperative can do: avoid legal liability for the consequences of their individual actions.
Corporate law is a pure product of the state's monopoly on force, which is being used to decree that certain types of organization (corporations) are to be priviledged over others (cooperatives, partnerships and individuals acting alone.) The only reason for this is pragmatic: corporations are huge engines of creation and productivity, and we owe a great deal of our wealth to the corporate form of organization. But that wealth is made possible only by the nanny-state sheltering individuals within corporations from the consequences of their actions.
So it is not clear why any libertarian keep talking about what "companies" can or cannot do, as in a libertarian system there would not and could not be any companies or corporations, only fully-liable individuals acting in partnership or cooperation.
Blasphemy is a human right. Blasphemophobia kills.