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I have a friend who runs his software consultancy company out of China. It's ridiculously cheap to run a company there. Whether it's better or not, I can't re

I have a friend who runs his software consultancy company out of China. It's ridiculously cheap to run a company there. Whether it's better or not, I can't really say because I don't have good tools to measure the risk, but it's definitely a lot less money than the US. Having said that, there are a lot of tax havens in the world and I'm not sure that China is the best one to set up shop in unless you are actively using Chinese resources.

bilbo0s 8y ago
Again, we are talking about the TAX SYSTEMS, not the overall business environments. Yes, I can have an entire floor full of C# programmers in Ningbo for a fraction of the cost of a floor full of C# programmers in Lincoln, NE, or Springfield, IL, or Nashville, TN. (And I won't even mention how much a floor full of programmers would cost in Austin, or SF, or Boston.) But my effective tax rate will be higher. Especially if you count "fees" as taxes. What your friend is likely taking advantage of is the fact that tax rates are only one of the costs of doing business. So s/he probably takes clients in the US, and collects money in the US, but has the work done in China. Why? Because that way s/he can potentially enjoy a host of US tax breaks made possible by the convoluted nature of the tax system here. The only money that needs to go to China is money to fund operations there. So your friend's profit margin will likely be orders of magnitude larger than if s/he tried to pull off a consultancy with all the programmers in the US. Again though, the thing is, we were only talking about the tax systems, which are no better in China than they are in the US. That was my point. (On top of straight taxes, your friend might have some issues getting his/her money out of China as well come to think of it.)
- mikekchar 8y ago
  It's even more interesting than that. There are no operations in china at all other than tax preparation. He hires an agency to staff the main office, which does nothing other than shovelling money around.

bilbo0s 8y ago

Again, we are talking about the TAX SYSTEMS, not the overall business environments. Yes, I can have an entire floor full of C# programmers in Ningbo for a fraction of the cost of a floor full of C# programmers in Lincoln, NE, or Springfield, IL, or Nashville, TN. (And I won't even mention how much a floor full of programmers would cost in Austin, or SF, or Boston.) But my effective tax rate will be higher. Especially if you count "fees" as taxes. What your friend is likely taking advantage of is the fact that tax rates are only one of the costs of doing business. So s/he probably takes clients in the US, and collects money in the US, but has the work done in China. Why? Because that way s/he can potentially enjoy a host of US tax breaks made possible by the convoluted nature of the tax system here. The only money that needs to go to China is money to fund operations there. So your friend's profit margin will likely be orders of magnitude larger than if s/he tried to pull off a consultancy with all the programmers in the US. Again though, the thing is, we were only talking about the tax systems, which are no better in China than they are in the US. That was my point. (On top of straight taxes, your friend might have some issues getting his/her money out of China as well come to think of it.)

mikekchar 8y ago
It's even more interesting than that. There are no operations in china at all other than tax preparation. He hires an agency to staff the main office, which does nothing other than shovelling money around.