4 ms·

Abroad often means exploiting cost of living arbitrage. Working in a US company with a US salary and living let's say in Portugal or Turkey or Thailand, means t

by mrtksn 4y ago

Abroad often means exploiting cost of living arbitrage. Working in a US company with a US salary and living let's say in Portugal or Turkey or Thailand, means that suddenly your compensation for the work you do becomes multiple times more potent. If you remove the money as intermediary, it essentially means that for the JavaScript button you created maybe you could have a meal but now you secure your weekly food. This is great but most people can't simply move because countries for some reason decided that only capital moves, people stay put and work and if they really really want to move they need to go though months long of bureaucracy and it's not even available for most people. This imparity between people breaks the natural tendency of equalisation and the arbitrage remains and creates political tensions because suddenly some services see unnatural demand, especially housing is particularly badly hit. Effectively some people get particularly good compensation thanks to the arbitrage when other people who might be working just as hard and could be jast as important for the function of the society get screwed if they can't work from home and miss out on the arbitrage and can't move to the higher paying places because they are only(!) human capital. So my argument is, I guess, this should be prevented from happening or the WFH from abroad people should be treated as local workers and pay taxes to to the host country. Ideally, anyone should be free to work and live wherever they like but since we are in a deglobalisation trend I have no hopes for it. So yes, WFH from abroad should be actually international workers and taxed accordingly.

jacknews 4y ago
Is this the same as when companies pay remote workers in poorer countries much less? Or even set up whole factories in poorer countries to save costs, but still charge the same price in the rich 'home' country?
- mrtksn 4y ago
  It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. When you setup factories in poor countries, that's considered an investment. Again, you setup a local company that is fully or partly owned by the you(depending on the country, there are restrictions) and that local company pays local taxes and operates in accordance to the local laws. When you bring the produce home to sell at American prices, you import that as if you are importing it from any other foreign company.
  - jacknews 4y ago
    Well I agree that tax is an issue, and workers shouldn't just relocate without taking that into account, but your argument seemed mostly concerned that they were "exploiting cost of living arbitrage.". Yet this is exactly what companies do when they employ foreign workers or manufacture in poorer countries and sell those products/services at full price in their home countries.
    - mrtksn 4y ago
      From that perspective, I agree but the dynamics are different. "Rich" people moving into your neighbourhood is very different from rich people setting up a factory in your neighbourhood. Both have positive and negative impacts but for the workers rich people moving into your neighbourhood is almost exclusively negative but if a foreign company sets up business in your neighbourhood its more of a mixed bag. Exploiting the arbitrage is how arbitrage is removed so it is a good thing in principle, notice how the poor countries seize being poor after rich countries invest in them and produce all the stuff for cheap. My problem is with the limits on who exploits that arbitrage. Workers are the most limited bunch with very little prospect to benefit from the arbitrage.
      - jacknews 4y ago
        Rich people coming to your country and bringing money is tourism. It's often a much better deal for the local population than a polluting factory intent on paying the most meager wages possible; often the reason they're even there, after all.
        mrtksn 4y ago
        Nope, Tourism has some benefits but it destroys local communities. In many places in Europe there are movements against tourism. Google for "Tourists go home" and start digging from there. The gist is, only the business and property owners directly benefit from it and the economy created from it often don't offset the troubles it creates to the locals. Factories are a different situation, they are a necessary evil if we would like not to go back living in the woods. Rich or poor, countries need factories and the pollution they create can and is managed. Not in poor, but in corrupt countries factories can create problems but other than that they are a good thing.
- galangalalgol 4y ago
  It seems precisely the same. But now it is a problem, because it benefits the worker instead of the business and country/state.
  - rtev 4y ago
    Either way, it seems like both are morally wrong. Each is predatory in a different direction.
galangalalgol 4y ago
Maybe this is just a sign that income taxes are an outdated way to have people that use your local services pay for them? Sales tax at least has shipping destination to go on.
- mrtksn 4y ago
  In many countries where enforcing income tax is hard, they do that. Often they still have income tax but since no one pays it, they try to collect it through VAT and other means. That's how you have very expensive iPhones in poor countries. It's not fun.
- mzi 4y ago
  Sales tax is a tax that hits low income households harder, since they consume a higher portion of their income. And it's impossible to have a progressive sales tax. So switching from income tax to sales tax would transfer money from the relatively poor to the relatively rich.
  - rcoveson 4y ago
    > And it's impossible to have a progressive sales tax. It may not have been done before but it's not impossible, right? You pay 5% on the first 10k you spend in a year, 12% on the next 30k, 20% on the next 50k, etc.
    - galangalalgol 4y ago
      Aren't luxury taxes and exemptions on necessities an attempt at this as well?
    - mzi 4y ago
      How would you enforce that? Track every purchase and attribute it to the correct taxable entity? That would mean no more cash. If I send my kid to buy groceries, is that sales tax on the kid or me?
  - fomine3 4y ago
    Just give negative income tax?
withinboredom 4y ago
You’ll find yourself in a world of hurt working remotely in a country you lack a work visa in. Getting caught is another matter entirely, but I assume they’ll come down on them eventually, probably by offering an incentive to citizens to report them.
- bombcar 4y ago
  This is a huge part of it; if your group of locals likes you and is on your side, you'll probably be fine. But if you piss off the wrong person, you could have a hell of a time (depending on the country, even spending time in jail). And the US embassy may not be inclined to help depending how blatant you were about it. Luckily, the more likely jail time is the more likely you can just bribe the right person, but again, you need the locals on your side to tell you who that is.
  - smileysteve 4y ago
    To agree; if you're quiet, don't use up too much bandwidth, parking, or have visitors you might stay under the radar; But maybe you have a rent dispute, maybe you party too hard one night, maybe someone at your pub doesn't like that you cheer for the other team. You're a blackmail target like anybody else doing something baseline illegal.
- petronio 4y ago
  Why do you expect them to crack down? The intent of disallowing working on tourist visas is to protect the local labor market. Digital nomads work for foreign companies and don't get location based market benefits that would be restricted to locals (consensus among the various communities seems to be that having local clients was a big no-no), so they add no pressure to local labor markets. In regards to the local economy, digital nomads are nothing but tourists. Rather than cracking down, the current direction is legalization. Countries where digital nomads are common know what's happening and they ignore it as it's beneficial to them and are now legalizing to get an even larger slice of the pie (by attracting those who were previously fearful). Others have mentioned the issue of housing stock, but regular tourists are actually more inefficient in that regards (very seasonal and short stays. Think about how many empty room-days most hotels have).
moconnor 4y ago
If you’re working remotely in the EU, you are treated like a local worker with respect to taxes etc. this can cause issues if your employer doesn’t have a legal entity in the country, which a whole range of third-parties will solve for a cut until employment and taxation law catches up with the 21st century. Source: living and working in the EU for employers from other countries for 15 years.

by mrtksn 4y ago

jacknews 4y ago

Is this the same as when companies pay remote workers in poorer countries much less? Or even set up whole factories in poorer countries to save costs, but still charge the same price in the rich 'home' country?

mrtksn 4y ago
It's not. You can't simply employ foreigners, you won't be able to do the administrative work and you can easily get into trouble for employing illegals. So when companies pay remote workers, they often have a representation in that country. This usually means(depending on the country) that the American company that "employs" these remote workers actually pay money to a company in the poor country and that company pays the local taxes and the workers. There are companies specialising in this, so they setup companies in many countries and when you hire a remote worker from legal point of view the worker actually works for this intermediary and pays local taxes. Another popular option is, to setup your own company and do the same thing but skip the middleman. When you setup factories in poor countries, that's considered an investment. Again, you setup a local company that is fully or partly owned by the you(depending on the country, there are restrictions) and that local company pays local taxes and operates in accordance to the local laws. When you bring the produce home to sell at American prices, you import that as if you are importing it from any other foreign company.
- jacknews 4y ago
  Well I agree that tax is an issue, and workers shouldn't just relocate without taking that into account, but your argument seemed mostly concerned that they were "exploiting cost of living arbitrage.". Yet this is exactly what companies do when they employ foreign workers or manufacture in poorer countries and sell those products/services at full price in their home countries.
  - mrtksn 4y ago
    From that perspective, I agree but the dynamics are different. "Rich" people moving into your neighbourhood is very different from rich people setting up a factory in your neighbourhood. Both have positive and negative impacts but for the workers rich people moving into your neighbourhood is almost exclusively negative but if a foreign company sets up business in your neighbourhood its more of a mixed bag. Exploiting the arbitrage is how arbitrage is removed so it is a good thing in principle, notice how the poor countries seize being poor after rich countries invest in them and produce all the stuff for cheap. My problem is with the limits on who exploits that arbitrage. Workers are the most limited bunch with very little prospect to benefit from the arbitrage.
    - jacknews 4y ago
      Rich people coming to your country and bringing money is tourism. It's often a much better deal for the local population than a polluting factory intent on paying the most meager wages possible; often the reason they're even there, after all.
      - mrtksn 4y ago
        Nope, Tourism has some benefits but it destroys local communities. In many places in Europe there are movements against tourism. Google for "Tourists go home" and start digging from there. The gist is, only the business and property owners directly benefit from it and the economy created from it often don't offset the troubles it creates to the locals. Factories are a different situation, they are a necessary evil if we would like not to go back living in the woods. Rich or poor, countries need factories and the pollution they create can and is managed. Not in poor, but in corrupt countries factories can create problems but other than that they are a good thing.
galangalalgol 4y ago
It seems precisely the same. But now it is a problem, because it benefits the worker instead of the business and country/state.
- rtev 4y ago
  Either way, it seems like both are morally wrong. Each is predatory in a different direction.

galangalalgol 4y ago

Maybe this is just a sign that income taxes are an outdated way to have people that use your local services pay for them? Sales tax at least has shipping destination to go on.

mrtksn 4y ago
In many countries where enforcing income tax is hard, they do that. Often they still have income tax but since no one pays it, they try to collect it through VAT and other means. That's how you have very expensive iPhones in poor countries. It's not fun.
mzi 4y ago
Sales tax is a tax that hits low income households harder, since they consume a higher portion of their income. And it's impossible to have a progressive sales tax. So switching from income tax to sales tax would transfer money from the relatively poor to the relatively rich.
- rcoveson 4y ago
  > And it's impossible to have a progressive sales tax. It may not have been done before but it's not impossible, right? You pay 5% on the first 10k you spend in a year, 12% on the next 30k, 20% on the next 50k, etc.
  - galangalalgol 4y ago
    Aren't luxury taxes and exemptions on necessities an attempt at this as well?
  - mzi 4y ago
    How would you enforce that? Track every purchase and attribute it to the correct taxable entity? That would mean no more cash. If I send my kid to buy groceries, is that sales tax on the kid or me?
- fomine3 4y ago
  Just give negative income tax?

withinboredom 4y ago

You’ll find yourself in a world of hurt working remotely in a country you lack a work visa in. Getting caught is another matter entirely, but I assume they’ll come down on them eventually, probably by offering an incentive to citizens to report them.

bombcar 4y ago
This is a huge part of it; if your group of locals likes you and is on your side, you'll probably be fine. But if you piss off the wrong person, you could have a hell of a time (depending on the country, even spending time in jail). And the US embassy may not be inclined to help depending how blatant you were about it. Luckily, the more likely jail time is the more likely you can just bribe the right person, but again, you need the locals on your side to tell you who that is.
- smileysteve 4y ago
  To agree; if you're quiet, don't use up too much bandwidth, parking, or have visitors you might stay under the radar; But maybe you have a rent dispute, maybe you party too hard one night, maybe someone at your pub doesn't like that you cheer for the other team. You're a blackmail target like anybody else doing something baseline illegal.
petronio 4y ago
Why do you expect them to crack down? The intent of disallowing working on tourist visas is to protect the local labor market. Digital nomads work for foreign companies and don't get location based market benefits that would be restricted to locals (consensus among the various communities seems to be that having local clients was a big no-no), so they add no pressure to local labor markets. In regards to the local economy, digital nomads are nothing but tourists. Rather than cracking down, the current direction is legalization. Countries where digital nomads are common know what's happening and they ignore it as it's beneficial to them and are now legalizing to get an even larger slice of the pie (by attracting those who were previously fearful). Others have mentioned the issue of housing stock, but regular tourists are actually more inefficient in that regards (very seasonal and short stays. Think about how many empty room-days most hotels have).

moconnor 4y ago

If you’re working remotely in the EU, you are treated like a local worker with respect to taxes etc. this can cause issues if your employer doesn’t have a legal entity in the country, which a whole range of third-parties will solve for a cut until employment and taxation law catches up with the 21st century. Source: living and working in the EU for employers from other countries for 15 years.