Software Tariffs and US IT Outsourcing? 670
HeelToe asks: "A while back I worked with someone who thought the US should simply impose tariffs on imported products to adjust their price to equalize foreign labor rates to the US minimum wage. I was laid off and my position moved to Canada last year. Since then, I've thought a lot about his ideas, as well as one of our topics of conversation a while back: Why doesn't the US tax the import of software? It seems to me like they should. It's not a "tangible" product (same reason used to deny my co-workers and me NAFTA and Trade Act benefits), but when someone outsources to another country with cheap labor for any other industry, there are usually import tariffs. Why is software different, and how would this change the climate of US IT jobs leaving for other parts of the world if we did tax software imports? I've done some looking on the web, but can find nothing in the Harmonized Tariff Schedule of the United States. I did find this thread from a few months back on informationweek.com's Career Development Forum, but not much else. What does Slashdot think?"
Re:Depends on the situation (Score:3, Informative)
Application of NAFTA rules to items with foreign content involves breaking the item apart into it's constituents and assigning values to each part based on cost, labor, and country of origin for that part. Then if enough is NAFTA made, no duty (simplified version). So while, Mexico and Canada wouldn't get hit, India, Singapore etc. could potentially be tariffed. Packaging is usually not a significant cost factor in the calculation from my experience.
The application of international trade tariffs to software is otherwise difficult. The old bits Vs. atoms problem.
bwh
- A proud Canadian ashamed of his federal gov't.
Dell needs to stop lying. (Score:3, Informative)
It makes me sick everytime I see that Dell Intern "Who turned out the lights in tech support?" commercial knowing that what they portray on TV doesn't resemble reality at all.
Dell cannot draw me into it's delusion of an american company anymore. I still love their service contracts though
Impossible to enforce and assess taxable value (Score:3, Informative)
Then even if they detect it, how do they decide a value on which the tax will be applied? A piece of software can cost anywhere from $0 to a over a billion dollars. The IRS will always end up undervaluing or overvaluing it.
Some countries are actually retarded enough to impose import duties on software; anything downloaded off the Internet gets in duty-free because they can't catch it, while anything physically brought in on CDs or diskettes gets taxed based on a value that the customs officer pulls out of their ass. I recently sent my brother 2 CDs with Linux and other free software because broadband is not widely available in his country, and they slapped on US$50 duty, ignoring the $2 value I put on the customs form (for the cost of the media) and the glaring FREE SOFTWARE label on the CDs.
Then there is the consideration that software can be duplicated infinitely. Someone can import a single copy of a software package that is worth $200 by itself, then get it installed on 10,000 machines.
And how would you assess the foreign value component of software that was developed by teams in the US collobarating with overseas developers?
Re:resons we might not have them. (Score:3, Informative)
If it goes up then yes it will be bad for some CEO's and a few consumers if the price actually goes up but we can save our jobs and help our economy.
The idea of wealth trickly down is that if companies make money they in turn hire more people which in turn they buy more products and the cycle increases. Republicans love this argument for tax cuts and use this reasoning.
The problem is our tax breaks and free trade barriers being lifted is pouring money out of our hands and into India and China. Yes I feel that Indians need to be paid more. I have a heart for them. But when my job is on the line I have to fight for myself.
This money cut from our services is being diverted away from us in the form of deficites and lack of labor.
The government suppose to work for us and not a wealthy few. We need protective tarrifs to keep our jobs and money flowing back down to us. American companies suppose to be responsible for American workers.
Re:it's kind of ironic (Score:4, Informative)
Really? The BBC seems to think they are comparable.
http://news.bbc.co.uk/2/hi/europe/687918.stm
Then we have longer term studies that show that the US has far stronger job creation than Europe, and in fact the unemployment measurements in Europe are artificially low because of training programs, early retirement, workweeks limited to 35 hours, etc.
http://www.epf.org/labor99/intrncontx.htm
Re:it's kind of ironic (Score:4, Informative)
Lowest unemployment rates? Not true in January 2003, at least, according to this table from the OECD [oecd.org] - the US rate was 5.7%, whereas Austria had 4.1% and Sweden had 5.3%, for example.
Trade Barriers cost US citizens $50 billion/year (Score:3, Informative)
Re:Bad Idea (Score:4, Informative)
Re:Bad Idea (Score:2, Informative)
FALSE. Sellers both lose money and charge more as a result of a tax. They lose money BECAUSE they charge more. Fewer buyers are willing to purchase at higher prices, therefore the number of sales decreases as tax rates increase. Sellers can choose to hold the total price to the consumer constant after the tax so as not to reduce the number of sales, but then their income per sale decreases. Either way, the seller's total income drops.
Really, as anyone who has ever taken eco 101 knows, who carries the burden of the tax, seller or buyer, depends on the elasticities of supply and demand. Except under monopoly conditions though, the elasticities are almost always such that taxes cut into profits. (Note, if Microsoft is a monopoly then government fines will be passed entirely to the consumer as higher prices without decreasing MS profits. So if the government is right that MS is a monopoly,then the goverment is screwing the consumers to punish MS. If they are wrong that MS is a monopoly, then they are unjustly fining MS. Either way, MS fines are fucked up.)
If taxes did not reduce revenues, then sellers could always increase profits by taxing their own goods (that is, raising prices). Double the asking price of your goods and double revenues ? It does not work. If you can understand why that does not work, then you can understand that taxes reduce profits. Try selling something on ebay and maybye you will understand. Double the minimum bid price and see if you double the sales price. Now think about whether a tax would have a similar result.
Re:Bad Idea (Score:2, Informative)
I've not made up my mind about whether software should be taxed. I honestly don't think the government could truly levy the tax anyway, because enforcement would be hard. I mostly find it a somewhat hypocritical stance to tax one form of import but completely ignore another.
Oh, and my job did move up to Canada, but I don't really feel like the grass is greener there. I keep in touch with folks still from the Canadian office and they have it as bad or worse than a lot of people here in the US. I guess I just included that commentary because it put a context around why I had those discussions with an ex cow orker.
I've been attempting to emphasize to potential employers that I have good technical skills, great writing skills, good presentation skills, and a willingness to help management see the business value and reason behind building high quality software. This in the long run I hope will be my differentiator and keep me employed when most of the "here, hammer out the spec for me in C#" type work goes overseas.
Re:Bad Idea (Score:2, Informative)
If U.S. software companies have to pay high tariffs in order to outsource work to India (and other sources of cheap, yet highly skilled labor), some of them may move to Canada in order to avoid the tariff. (Moving directly to India would also be an option, but I think U.S. executives would be more inclined to move their companies to Canada for language/cultural reasons. In other words, if the choice is between moving to India or moving to Canada and then outsourcing to India, I think most U.S. executives would prefer the latter.)