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So unfair competitive advantage to the local companies? If it were so easy I wonder why they don't do this already. Additionally what about services or product

by taysic 9y ago

So unfair competitive advantage to the local companies? If it were so easy I wonder why they don't do this already. Additionally what about services or products that don't exist or haven't had time to be replicated in one's country. Then that country cannot be on the cutting edge of new technology simply because they penalize buying from international companies.

aembleton 9y ago
It would be an advantage to local companies - yes! At the moment, local companies are often at a disadvantage because they're paying more tax than those companies who are legally based overseas. If the product or service doesn't exist locally, then the purchasing company will indeed need to pay tax, if and only if it's local sales are greater than local costs. If buying this overseas service such as AWS hosting gives it an advantage such as cheaper and simpler scaling then it may well be worth them buying it to pay the tax. At the moment, an outside company can come in and pay little to no tax by licensing IP from another subsidiary in a third country. A local company is then at a disadvantage and is effectively paying for the infrastructure through their own taxes to support a competitor.
- taysic 9y ago
  This is one of those things that sounds great on paper but in practice basically kills any chance of a startup environment in the country. Why would a startup wish to grow in such a nation if there are other places where the ability to buy useful services from other international companies are so much cheaper?
  - aembleton 9y ago
    Because a startup is likely to have greater local costs than local sales and so wouldn't pay any taxes. When you start a company, you have many local costs (wages, rent, utilities) and yet you haven't made any sales. In the tech sector, when you do make sales they are likely to be at least in part overseas. Therefore, it will be a while before you then have to pay any tax. When you get big enough that your local sales become larger than your local costs, then you will probably be able to afford the extra tax as you are now benefiting from the infrastructure provided by the state.

by taysic 9y ago

aembleton 9y ago

It would be an advantage to local companies - yes! At the moment, local companies are often at a disadvantage because they're paying more tax than those companies who are legally based overseas. If the product or service doesn't exist locally, then the purchasing company will indeed need to pay tax, if and only if it's local sales are greater than local costs. If buying this overseas service such as AWS hosting gives it an advantage such as cheaper and simpler scaling then it may well be worth them buying it to pay the tax. At the moment, an outside company can come in and pay little to no tax by licensing IP from another subsidiary in a third country. A local company is then at a disadvantage and is effectively paying for the infrastructure through their own taxes to support a competitor.

taysic 9y ago
This is one of those things that sounds great on paper but in practice basically kills any chance of a startup environment in the country. Why would a startup wish to grow in such a nation if there are other places where the ability to buy useful services from other international companies are so much cheaper?
- aembleton 9y ago
  Because a startup is likely to have greater local costs than local sales and so wouldn't pay any taxes. When you start a company, you have many local costs (wages, rent, utilities) and yet you haven't made any sales. In the tech sector, when you do make sales they are likely to be at least in part overseas. Therefore, it will be a while before you then have to pay any tax. When you get big enough that your local sales become larger than your local costs, then you will probably be able to afford the extra tax as you are now benefiting from the infrastructure provided by the state.