Are Fools in Power?

There’s news that global corporations with headquarters in USA are asking for a tax holiday on money earned outside the USA returned to the USA. They want the 35% tax rate normally applied to be reduced to 5%. The hope is that this will result in the money being reinvested to create new jobs in the USA.

I know a bit of maths and I figure that, if M$ moved 90% of its employees to Mumbai, India, brought the profits home and paid less tax, the measure would actually reduce jobs in the USA. What am I missing? M$ pays about $4 or $5billion per year income tax in USA. If they exported jobs, probably to lower wage countries like India or China, they would have lower costs and pay lower taxes under this measure… Hmmm.

see Apple, Google, Microsoft seek gargantuan tax break

Congress debates jobs and Jobs

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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6 Responses to Are Fools in Power?

  1. Contrarian says:

    Only if you want to move there with it. I wouldn’t want to do that and the decision makers in the business do not want to do that either. Since they get to make the decisions they opt for moving the developers to the USA. You get more productivity here and you don’t have to learn a funny language.

  2. Simple. Move all the discussion to Mumbai…

  3. Contrarian says:

    “I think programmers in Mumbai can be just as productive as programmers…”

    You have to work in the business to get the nuances of all that. There is a big difference between trying to integrate contributions from a design group in India and with integrating individual developers from India who have moved on-site in the USA via the H1Bs.

    Spend some time on weekly or even daily (Agile)conference calls with your fellows in Mumbai where one group or the other is suffering from the inconvenience of the 10 hour or so time difference and grappling with the other’s idioms and accents. Excedrin Headache #1002!

    Developers will follow their favorite ways unless kept on a planned path by attentive administrators. Left alone overseas, the Mumbai bunch will soon wander off to implement their pet ideas whereas if you keep them in Redmond or Cupertino or wherever home base is found, you can make incremental progress in the desired direction with some ease.

  4. ray says:

    Perhaps there is simply not enough people to fill the jobs.

  5. I think programmers in Mumbai can be just as productive as programmers in RedMond, WA. Just ask Bill. He wants to give them visas.

  6. Contrarian says:

    “I know a bit of maths and I figure… What am I missing?”

    The short answer is understanding of the economics theory underlying this idea. The profits are not being made by moving jobs to Mumbai, they are being made by selling Windows licenses in India. And by selling Windows licenses in many other foreign countries.

    Those profits, remaining after local taxation has been paid, stay overseas, concentrated in various tax-favorable areas such as Ireland. Bringing the money “home” to Redmond does not export jobs, but it makes the money available for financing expansion in the USA. If all that Microsoft wanted to do was to expand in Mumbai, they would leave the money in India and use it for whatever costs were involved with that expansion. They could probably get some tax incentive from the Indian government to do that. I suspect that is already the case, although I only know about their new stuff in China for sure. They were much more inclined in the past to obtain H1B visas and bring “Mohammed to the mountain” so to speak.

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