TJ must be rolling over in his grave.
http://www.itexaminer.com/ibm-pulls-out-of-us.aspx
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TJ must be rolling over in his grave.
http://www.itexaminer.com/ibm-pulls-out-of-us.aspx
no big surprise.
Lower the Corporate Tax Rate = answer
The U.S. has one of the highest corporate tax rates in the industrialized nations. We are around 35% or so.
Ireland who has the lowest in the world, has around 12% or so. No wonder their Capital is always "Dublin!"
I don't have the links or proof on me right now, but surveys of companies who have outsourced jobs have been taken. They overwhelmingly stated that they would bring the jobs back here to the States.
Another factor as to why they either outsource or move out completely is because of the high rising health insurance rates for employees. I'm not going to try & get political here, but I do wish Obama luck with his plan to make healthcare more affordable. One of the underlying problems with this, is that people here illegally rarely pay hospital bills as they are hard to trace & keep up with.
-jay
You are wrong in several respects there............our corporate taxes are around 40~50%.Quote:
The U.S. has one of the highest corporate tax rates in the industrialized nations. We are around 35% or so.
The answer is that an Indian will work for $800 a month whereas his US counterpart will want $800 a week.
Over the years I have filed corporate tax returns for the US, Canada, Australia, South Africa and most Western European countries and I can assure you that direct labour costs are totally deductible in calculating taxable revenue ;)
The issue is expected compensation levels, no more, no less.
Compensation is just one piece. The issue is total operating costs of which, especially in a service oriented business, the largest expense is employee costs and taxes. As the govt enacts laws to force companies to provide all sorts of benefits (e.g. paid leave, mandatory healthcare), employers will simply move the work to other less expensive countries.Quote:
The issue is expected compensation levels, no more, no less
http://www.taxfoundation.org/publica...how/22917.htmlQuote:
Currently, the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD countries to Japan's combined rate of 39.5 percent.1 Lowering the federal rate to 30.5 percent would only lower the U.S.'s ranking to fifth highest among industrialized countries.
When compared to other OECD countries:
24 U.S. states have a combined corporate tax rate higher than top-ranked Japan.
32 states have a combined corporate tax rate higher than third-ranked Germany.
46 states have a combined corporate tax rate higher than fourth-ranked Canada.
All 50 states have a combined corporate tax rate higher than fifth-ranked France.
Hmmm,
That link states British tax as 30%. What it doesn't take into account are our employment tax and local business rates. Neither of the latter two are profit related.
One point you haven't mentioned, that is certainly an issue over here, is the cost of providing workspace in major cities. Coupled with this is the fact that such workers require far higher compensation to cover their cost of living; both accommodation and transportation.
To me the whole thing is rather short term and short sighted. I am old enough to remember when "made in Japan" meant cheap and nasty. Now their manufacturing has gone the same way as our own.
I went to a camera shop a while back and looked at cameras and binoculars:
Nikon
Canon
Yashica
Pentax
Minolta
All of them were made in China :eek:
Could be.Quote:
To me the whole thing is rather short term and short sighted.
But it sends a loud message to Congress. Too bad they are all deaf and dumb. ;)
The only message I can see Congress getting is that IBM don't give a damn about their US employees.
Sorry, corporate taxation is not an operating cost, it is a sequestration of profit. Over here, our employment tax and property taxes are operating costs as they depend on the scale of your operations, number of employees and their compensation.Quote:
The issue is total operating costs of which, especially in a service oriented business, the largest expense is employee costs and taxes.
Basically IBM is typical of a large monolithic organisation. They tend to over expand in times of plenty and contract accordingly in downturns. Heading into a major recession would tend to make them overstaffed, so they have been moving non-critical work to their (cheaper) overseas subsidiaries, and laying off North American staff. Thus far their results have exceeded market expectations, so this would seem to be a precautionary strategy.
Reminds me of the old joke:
Two lions escape from the zoo. They decide to split up and meet back in two months to see how the other is doing.
Two months later, one lion is scrawny and beat up, the other is fat and happy. The scrawny beat up lion says, "I went to the park and started eating children. The police and national guard came after me and I haven't stopped running since. How are you so well fed?"
The second lion replies, "Easy! I Just hid outside the IBM office and ate a manager every day. Nobody even noticed!" :D
I don't actually believe that these overseas jobs are really available to North American employees, it is just a political smokescreen. It does make sense to retain some functionality at a much lower cost to make it easier to come out of a recession.
Remember, IBM are no strangers to staff cuts............they must have dumped 150,000 in the 1990's?
I was quoting the most conservative # from John McCain, the guy who ran against Obama. I have heard as high as 40% but have not heard any higher. You may be right, nevertheless it's too high.Quote:
Originally Posted by nihil
total agreement not to forget he/she will also work without even considering health insurance whereas in the Western world it seems to some to be a "constitutional" right. I will say this, lower the corporate tax rate, it will most definitely decrease the chances of companies considering outsourcing. The studies show that to be a fact.Quote:
Originally Posted by nihil
agreedQuote:
Originally Posted by nihil
Interesting!
Over here your profit and loss account would be something like this (shown without the detail here :))
Operating Revenue £xxxxxx
Direct Costs (£xx)
Gross Operating Profit £xxxx
Expenses (overheads) (£x)
Net Profit Before Taxation £xxx
Taxation (£x)
Net Profit After Taxation £xx
Dividends (£x)
Transfer To Reserves £x
Now, The "taxation" element would be our "Corporation Tax" and our other corporate taxes would be included in Direct Costs and Expenses, as they are employee and property (real estate) related.
The way accounts are perceived over here is strictly vertical. If you source offshore you will reduce Direct Costs and Expenses. This will inflate your reported Operating Profit, Net Profit, Earnings Per Share, PE Ratio and all those good things that market analysts like. ;)
Reducing Corporate Taxation will not affect those in the slightest..........it's just the government getting their feet in the trough along with the shareholders.
The main reason to reduce CT would be to increase the transfer to reserves which improves cash flow and supposedly encourages companies to reinvest with their own funds.
In times of recession that is highly unlikely to happen. The funds would simply be used to maintain shareholders' dividend payments and bolster the balance sheet.
EDIT:
It is interesting to note that although this story is 10 days old the only place it seems to have got any credence and coverage is in the Indian press?
^^^ re:
You know that the Indian press will cover that story. I take for example of when a major auto maker wants to make a factory in your local area, it's always in the local news of where you live, whereas it may not be elsewhere in your Country. Jobs is what it brings & to a certain extent, may at least appear to give your area a little more clout or bragging rights if you know what I mean.
I'm in the southeastern part of the States, namely in Atlanta. Many companies move from states up north down here to where the tax rates are lower for their businesses. And by times, many of it's employees will love down here with the company. The state I happen to live in, Georgia, is #5 on the top states for businesses to succeed in according to Forbes magazine. On this list, anyone with any amount of business knowledge knows that all of the states within the lower half have high tax rates, not only for companies, but also for it's citizens.
You are 100% correct when you state that the operating cost for companies is cheaper when shipped out of the Country, so when this happens, I exercise my choice in not to do any business with them.
..Quote:
You know that the Indian press will cover that story
Wrong there.. Indian news media covers everything but news.. And I'm not joking :|
Guys did anyone watch spec's video link?
Two things
Labor costs
Unions
I **** you not. It is cheaper to chop down a **** load of trees in Washington state; Ship them to China where they are sliced and diced into whatever, then shipped to a factory in Michigan for final product assembly.
Union transportation costs across states;Washington to Michigan, is more than the boat ride to China.
Processing the trees in the states costs almost twice the cost of boat ride back. So labor costs on processing the wood are almost null.
The reason the the southern states have a higher success rate is they are right to work states. Michigan you MUST be in a union to work. So you can make $24 per hour without knowing how to read or write.
yes another contributing factor in this is the unions.Quote:
Originally Posted by dinowuff
When you mentioned southern states, that is not the whole truth to the matter. Virginia is #1 yet again, but this list varies. http://www.forbes.com/2008/07/30/vir...eststates.html
Utah is #2 and North Carolina #4.
Michigan & progressive states such as Massachusetts, New York and California did not fair too well.
High taxes + big labor = not good for business anywhere. Since you mentioned Michigan, I meet lots of people from there & places like New York that move here because of the lack of jobs. Michigan's local economy has been way down for a while now. I hope you guys get better up there.
Well, I wouldn't be in too much of a hurry to blame the unions, certainly not in the UK.
I look on it as "restrictive trade practices" which actually come from labour, employers and the government!
For example:
1. Labour. Typically the "closed shop" which is mandatory union membership; and "demarcation lines" where only certain workers (read union members) are allowed to do certain jobs.
2. Employers. They have cartels and quangos which basically set artificial price levels. This leads them to inefficiency, and their only remedy when things go wrong is to lay off workers.
3. Government..........they actually play a large part in it, particularly as we have EU regulations as well as our own. Factors would be:
(a) We have a minimum wage which is currently £5.73 [$8.18] per hour
(b) The maximum number of hours (on average) you are supposed to work a week is 48.
(c) The minimum paid holidays is 4 weeks/year plus national holidays. That means the EU averages 6 weeks per year.
(d) Statutory sick pay which the employer has to pay for several days and contribute to for 6 months or more depending on length of employment.
(d) Equal pay regulations. Employers are basically forced to pay the same for the same job.
(e) Employment tax. The employer has to pay a percentage of a worker's compensation up to a certain threshold.
(f) Certification. You seem to need an official certificate to wipe your a$$ around here these days. It increases labour costs no matter who pays for it, as the government certainly don't.
(g) Statutory redundancy compensation, which can be quite high, and still leave the employer with a pension liability.
(h) Job security regulations..........your employer can't change your terms and conditions without your consent. He would have to pay redundancy and possibly unfair dismissal compensation.
That leaves us with different economic environments, which is basically "cost of living".
In the UK the minimum wage is £230/week and the average around £470/week [$325/$670). I would expect that in cheaper countries people would be happy with a half of that?
Hell, even if you gave them similar benefits, I would expect the cost to be pretty much proportionate to the local compensation rate?
I can see the same sort of thing over here, so I imagine it must be far more obvious in the US? For me to maintain the same standard of living in London as I do here I would need around $20,000 a year more after tax and deductions.
EDIT:
Hey,
ByTeWrangler
I just heard that IBM had just laid off 700 Indian workers, and that these were new intake graduates/interns. That makes me even more suspicious that it was a political move by them.
It doesn't look good when you take on a crowd of kids from college and promise them a career with a major player, then let them go a few months later.
I bet they deliberately leaked the story to the Indian media, as it appears to promise that more jobs will be coming but they will be more senior and better paid. :cool:
It is fairly standard practice in a recession to lose temporary, part-time and trainee staff and consolidate with more experienced people.
Nihil good post. You are well versed on translating the pound into U.S. currency. I have no base knowledge on the currency there. Nihil>jamz
I got to get in these forums more often. I joined several years back but never really took the time to come here often enough. Before the other day, it was since the summer of '07 since I had last visited here. This site is too good to ignore.
Later & cheers!