India Seeks To Introduce 'Lou Dobbs Approved' Skype Ban To Hamper Offshoring Industry
from the short-term-thinking dept
Just as eBay was completing their deal to buy Skype, it was reported that Chinese officials were looking at ways to ban Skype in the country. Since then, Skype has bent over backwards to stay on China's good side, but it's still a risk. Plenty of other, smaller countries have tried banning Skype, usually as a way of protecting nationalized telephone service revenue. Of course, that view is often extremely short-sighted. As some countries discovered, by keeping telecom costs artificially high, it makes it more difficult for countries to take part in things like offshore call center work.That last point seems particularly important in this latest case. Broadband Reports points out that India is working on a proposal that would ban the use of "unlicensed foreign" VoIP providers such as Skype or Net2Phone. The problem, you see, is that Skype and its ilk aren't paying the 12% service tax and 6% revenue share that the Indian government demands. Of course, by making it more expensive to do telephony in the country, it seems like they're only hurting the call center business that has employed so many people lately, which probably leads to much bigger problems than a small cut in tax revenue. There are other countries around the world greedily looking at India's offshoring business. With India facing a labor shortage of skilled workers for these jobs, labor wages are increasing as well. If other countries can offer both cheaper labor and cheaper telephone service, the highly touted Indian offshore call centers may no longer be able to compete -- at which point, the tax losses from those firms losing business will greatly outweigh the 18% not received from Skype.
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heh, just wait
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Not that unintelligent
It's applying the tax in the first place that makes telephony more expensive, which ultimately might start moving call centres away from India and into other countries.
Given the labor shortage though, it probably makes sense to tax the existing business. If India can only support x call centres because of the amount of labor available, then raising the price with taxation will bring demand back inline with supply.
Banning Skype will bring the supply/demand balance further into the control of the Indian government, which makes quite a lot of sense really. If India starts losing out to foreign competitors, I'm sure they'll have the sense to lower the taxes.
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Re: Not that unintelligent
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Re: Re: Not that unintelligent
You're all forgetting that government intervention in the markets always leads to deadweight loss, somewhere, somehow. Also showing a typical socialist-level understand of economics; an overheating labor market doesn't have to be a bad thing, not when the typical income there is so low. Supply and demand, as you guys put it, will operate efficiently on it own terms better than under the slow, indecisive thumb of the government, as when labor costs get too high, job creation would slow in that industry. Then India would be left with the maximum number of employed call center workers earning the maximum possible wages, who then spend their maximized incomes on other consumer goods in the local economy when they arent slaving over phone lines. The government coming in and trying to manipulate the markets only make them less efficient.
Capitalism wins every time. Given that they'd be lowering average income and lowering tax revenue below what it could've potentially been with a maximized call center market, it's a lose-lose for India, but can't expect socialists or lobbyist to see that.
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Free markets anyone?
Yes, it makes a lot of sense to a communist/socialist regime whose goal is to control most if not all aspects of the marketplace, thus making matters worse for it's citizens, especially the poor.
Of course to encourage a free market where voluntary exchange occurs between parties this is a very bad move.
But you already knew that.
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The government has time and time again shown that it is willing to protect public enterprises from competition. When the competition gets too close the rules of the game are changed midway.
This has happened in the mobile telephpny, airlines, mass transport and many other sectors.
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Re:
Welcome to the globalization!
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Re: Re:
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Doesn't that advocate removing taxes altogether?
I'm all for free markets, but profitable ones are always taxed by governments. There's nothing wrong with that.
I probably should have said "which makes quite a lot of sense from their point of view".
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Response to Matt's response
I take exception with your statment "There's nothing wrong with that."
I think there IS something wrong with that. It's not impossible to think of markets that are not taxed, or at least not nearly as much as they are now.
The more you tax the more incentives are diminished, the more you lower the standard of living for the citizens, the bigger government becomes, and the more they want to tax.
It's bad the more taxes are introduced. Not good. Ever.
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screw the b@$turds
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If a firm wants to do business in a country, they need to pay their taxes and abide by the law of the land. Why is it so difficult to understand?
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