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Former Soviet Republic of Georgia To Become IT Tax Haven
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.'"
Thats basically what happens when countries lower their taxes corporations go there. It seems to be something that the current administration doesn't seem to understand, if we're charging higher taxes, higher labor costs, for essentially the same service why not move elsewhere? Most businesses would want to stay in the US but when the US seems to be raising taxes for successful businesses, is there any reason not to move?
Taxation is legalized theft, no more, no less.
They do control a large percentage of our Peach reserves......oh you mean the other Georgia? Fuck who knows.
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.
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.
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. Goods don't cost the same everywhere. Also there are people who are equivalently poor in any country you care to name.
Georgia is #11 in the "Ease of Doing Business Index", and generally has very lax economic regulation across the board. There have been some sweeping social and political reforms since 2004, and the guys at helm are die-hard economic liberals, with all that implies - very little bureaucracy, and tendency of government to keep its nose out of business affairs for as long as all taxes are paid.
I'd say that, if you're looking for a libertarian paradise, it's one of the places closest to that. How long that will last is a good question, though - there have been some claims recently that Georgian economic growth has all signs of an investment bubble, and it's about to burst.
At first Georgia is fast gworing with economy, out of corruption, ZERO mafia (some in here sad that russian mafia is in georgia, i guess georgian mafia is in russia :) ):
From 2003 to 2010, after rose revolution georgia get:
1. GDP grow from 12%
2. Industry income grow for a 1200%
3. Building industry product grow for a 800%
4. Overall grow of trading 600%
5. Communication sector grow - 400%
6. External turnover grow - 900%
7. Import grow - 900%
8. Export grow - 500%
9. xternal debt rose by only 10%, in 2003 was 600 of common income, now is less
10. Average salary grow - 600%
11. Unempoyment grow - 14% from 12%, even after 2008
12. Corruption ranking - from 133th (near russia) to 58th
Literacy Level - 100% (only one and #1 in ranking)
Ease of doing business Ranking:
2009 rank - 16th
2010 rank - 11th
1. Infrastructure
2. Workforce availability
3. Culture of working
#4. Political stability
5. Religious stability
6. Social stability
7. Corruption
8. Legal system
Georgia is missing only political stability because of attacks of instable neighbours, but according to US military bases establishment - now it should be ok. Regarding others - Georgia is trying to get very close to the EU, so country is changing its legal system and standarts according to EU requests.
Mentality - out of USSR, hating USSR, hating Staling, working, learning, management, clean, literal, educated, traditionally guests are best friends, beer :)
IT/telecom access technology grow (@home result you can feel):
Y2002:
Dial-up, 1 hour = ca. 0,4 USD, 56k
Mobile: 2G, ca. 0,2 USD per minute
Y2010: :)
ADSL/ADSL2+ (one of the first countries implemented, available even in villages) = unlimited, 50 USD per month
Fiber to the home (available almost everywhere in big cities) = unlimited traffic, 100mbps to gbps local connection, 10bmps - 100mbps global, 50 USD per month
4G WiMax Mobile = unlimited traffic & speed, 50 USD per month, closing due other technology evolution
3.75G EV-DO CDMA Mobile = unlimited traffic, up to 3mbps speed, 30 USD per month, ca 70% coverage
3.75G UMTS Mobile = ca 50% coverage, 100% in cities, 0,02-0,3 USD per MB
2.5G GSM EDGE = ca 90% coverage (available everywhere), 0,02-0,3 USD per MB
Dialup - not available
Someone said something for labor cost, ok, if you believe that IT guy cost is big in georgia (actually its both - there is a scaled price range), then you can get additional workers from neighbour countries like armenia and azerbaijan, or even take indian guys in there...
Some ad videos:
http://www.youtube.com/watch?v=ynihqPoG0Wk
Capital:
http://www.tbilisi.gov.ge/index.php?lang_id=ENG&sec_id=1
http://www.youtube.com/watch?v=ax5xPZ5BZOA
Batumi (second growing city), was in communistic ruines, now growing:
http://www.youtube.com/watch?v=3HOa15Inzr0
Banking grow - oh, don't tell me about that, you can even compare to EU, especially in social needs like searching for ATM, absolutely no problem
"It feels like I'm at the Zoo when reading this thread - I'm frightened, but it's interesting" (c)