Global

There used to be a time not too long ago (in the 60s) when the top UK income tax rate was 97.5%, the top US income tax rate was 94%. Granted these rates were for the 1%’s of that time.

I suspect that these rates came as a response to the “Pay their fair share” crowd of that day.

In other words these high marginal tax rates where always intended more as a way of pleasing peoples emotions than a pragmatic goal of generating more revenue.

Alfred has set up his own information business on a busy street in Monrovia. He posts a compendium of news on a blackboard. His sources are local news papers and a network of correspondents throughout the country.

I was quite fascinated that the most prominent information is current market prices for a whole range of different commodities as well as currencies. It shows how important good price data is in any society.

His business model? Advertising.

Liberia’s Blackboard Blogger from WhiteAfrican on Vimeo.

Just came across this post about Starting an Internet Business in China, which covers some interesting things that you might not have thought about.

Go read it yourself, but I’d just like to make a comment on his first point: “Hong Kong is your friend”. He points out that you should incorporate and bank in Hong Kong. This is easier than in mainland China, but also is a known entity in China so it makes it so much easier to setup payments etc.

From my own experiences these are the things you don’t often think about if you’re coming from the US. But banking, incorporation and payments can be extremely difficult in many companies. Even more so if you’re a foreigner.

Hong Kong works under the British Common Law system and has over the last 50+ years perfected the legal structures and banking for international commerce. I’m sure that there are issues you run into as a foreigner, but they are likely to be a lot less trying than what probably could happen to you in mainland China.

This also brings me to the subject of offshore companies. If you believe the press this is all about tax evasion. However there are many reasons people use them. These may be hard to think of if you’re in a relatively well run country such as the US or Denmark.

In many cases such as the above the red tape in China is too difficult to deal with, so people incorporate offshore in Hong Kong instead. There are other cases where the local financial system is quite literally unsafe, where people have lost their money time and time again. Which is why many people from Latin America store their money offshore in Uruguay, Miami and Panama. Yes, Miami is offshore if you’re from South America.

Another great piece of advice is to avoid the temptation to undercut. This is good advice for anyone following my idea on global bootstrapping. It may be cheaper where you are but use that to your benefit and reach ramen profitability even quicker.

We’ve just moved to Miami, well Miami Beach, FL. I arrived back in the US (San Francisco) about 2 years ago and it was time to try something new again. So we drove here from San Francisco and saw (and tasted) a lot of this great country.

Why Miami? I’ve been asked this a lot. While Miami is extremely popular with in particular Europeans and Latin Americans, it does seems to have quite a bad reputation amongst most American’s. I don’t know if it’s Miami Vice or just that “Anglo’s” are the minority here?

Weather

Better weather for my taste. I like the tropics and heat. Winters here are even a tad too cold for me. I know people love the Bay Area weather, but it’s just too cold for me most of the year.

Housing

Miami has been hit by the housing crisis, which sucks if you own here, but as a renter this is brilliant. Apartments that would easily cost $4000/m in downtown SF go for $1500/m in down town Miami. With much better views to boot. You can also find plenty of apartments in that price range in Miami Beach just without an ocean view. Expect to pay $500-1000 more for that. Miami Beach is a great walkable town that actually reminds me a bit of a Palo Alto that never sleeps with an amazing beach and tons of great restaurants and clubs.

I have long been pushing the idea of bootstrapping globally by which I mean founding your startup in a place with low cost of living. Miami currently allows you to do just that while staying within the US. OK it’s not quite as cheap as Argentina, but housing in Panama is more expensive than Miami now (other costs are still cheaper).

Culture

I really like the Latin American influence – from Cuban Ropa Vieja to Colombian night clubs, the only place that comes close in the world as true Latin American melting pot is Panama.

The west coast also has a large Latin American community, but it’s pretty much a mono culture, with 90+% being from 2-3 northern Mexican provinces. Here you get lots of people from all over with resulting fantastic things to try:

Uruguayan Chivito restaurants, Argentine Pizza and Steak houses, Venezuelan steak houses, Cuban-Spanish soups to which I am addicted, Colombian hot dog joints etc. etc.

Outward business culture

Business wise, I think Miami is more focused on the rest of the world than say San Francisco. I have always been interested in technologies that make a difference in the poorer parts of the world. Miami being one of the 2 most important centers for business in Latin America (the other being Panama) is by default outward.

San Francisco is extremely international, but in a strangely inward almost insular way. Smart people from the whole world congregate in San Francisco, but it seems to me that once they arrive (including myself) they naturally focus too much on what the SF digerati thinks, assuming the rest of the world will follow. Granted this has created things such as twitter and github which the rest of the world pretty much ignored until recently.

Growing Tech community

The Miami tech community is growing. It is clearly not as large as San Francisco’s and probably will never be. That said, the community is vibrant and everyone seems to know everyone else. Many foreign entrepreneurs are moving to Miami as well. I’ve run in to more Danish (and of course Latin American) web entrepreneurs here than in San Francisco.

Last night I went to the Miami Ruby Brigade meetup which was pretty well attended. Refresh Miami a cross disciplinary group of people interested in technology has become an institution and I’m looking forward to attending my first next week.

What about San Francisco?

I still love San Francisco. Living there was a good experience and I certainly recommend any tech entrepreneur or programmer spend some time there. The best thing about being there is the killer tech and startup community, but thanks to twitter and google groups you can easily keep up with much of that from where ever you are in the world.

Anyway I’m looking forward to spend a couple of years here in Miami.

There have been two related blog posts in the last couple of days :The Cure to Our Economic Problems by Mark Cuban and Amen Brother Cuban by Matt Maroon that I can absolutely sympathise with. True entrepreneurs are so focused on their idea that they will find a way.

Mark says:

The impact of tax rates on productivity and development is something economists masterbate about, enterpreneurs don’t waste their time thinking about it. We have business to do.

Matt replies:

Exactly. When I started my first company I’d never even heard of capital gains taxes, and had no clue what I’d be paying even at the personal rate. All I knew was that I had an idea for a web site that I thought would be pretty successful (and it was) and I wanted the corporate veil for protection.

The current tax rates in the US aren’t so bad that they necessarily stop entrepreneurs. In particular entrepreneurs who aren’t focused yet on profits or business models are not particular worried. However before we start voting in more taxes, please listen to this cautionary example of Denmark.

It is possible to kill entrepreneurship through taxes. In my country Denmark taxes are pretty much double than what they are here in the US. When it reaches those levels it plays mind tricks on even the most devout entrepreneur. It colors your strategy and makes you do things you wouldn’t normally do if you were living in a more forgiving tax world. In the US Matt doesn’t have to know about Capital Gains Tax in Denmark he does.

Many Danish entrepreneurs that I know leave the country and go to more forgiving tax climates before they start their business. Just think of all the potential great business ideas that get left on the floor because potentially great people end up fearful to start their business in their own country.

If you start your business and then move to England or Spain you are forced to sell your business to yourself and pay at least %33 capital gains on it. Just imagine if you had to do that moving from say California to Oregon. Rather than face this many Danes never end up pursuing their dreams.

There are all sorts of loopholes and tricks that people who really want to pursue their dream in Denmark have to learn and go through. Isn’t it better to focus on your business than whether or not the computer you are buying to run your business is tax deductible or not.

You can read more about the problems facing startups in Denmark or my bootstrappers guide for Denmark.

One thing that Denmark has that the US doesn’t is a fairly reasonable corporate tax rate. Most European countries now have fairly low corporate taxes yet get you on their sky high personal income taxes and sales taxes.

The US could definitely do with a lower corporate income tax. We have the second highest in the OECD. As a startup the workaround for this is S Corps or LLC’s, where you are taxed at individual rates.

More important though than plain lower taxes would be a simplification of the tax structure. The US tax code is extremely complex. Intuit and various accounting firms have been lobbying to keep it as it is for years as it is obviously beneficial for them. We the individuals as well as startups suffer the consequences of this. It needs to be made simpler. Like what Mart Laar did in Estonia.

While I do think Taxation borders on the immoral, I think that an even worse side effect of taxation than taking your money is that it changes the way you think and manage your business and daily life. Lower it, but more important simplify it.