« King Abdullah | Main | Minimum Capital Requirements »

May 30, 2007

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Bernard Guerrero

Questions? Ok.

"Since many Jordanians work in the Gulf States, this makes Jordan one of the few countries that is both a destination and a source for guest workers."

Why does this situation obtain? A premium for Arabic-speakers in menial or semi-skilled positions in the richer Gulf states? Or are the Jordanian expats high-skilled?

Let me take a stab at the method. I'd think the revenue neutrality part would be easy if you can get a decent read on the demand for charters. Estimate a regression equation for the demand for corporate charters per person in flat-fee states, based on (I'm guessing) the size of the fee as a ratio of PPP-adjusted income and some summary measure of red-tape and/or corporate taxes other than the charter fee. Set that puppy times the fee equal to current revenue (or better, if you really need to sell this thing) and solve for the optimal fee.

Alternative: Just drop the fee to something nominal and go with a franchise tax based on assets or issued shares, ala Delaware.

Noel Maurer

I'm curious about five things.

(1) How do you develop a revenue-neutral change in the fee schedule?

(2) How are you trying to discover the latent demand for LLCs?

(3) If the answer to (2) is "lots," how is the Jordanian government planning to pay for the additional bureaucracy?

(4) Is the problem with the al-Masri that the Jordanians fear that the Egyptians will use what Mexicans so creatively call "prestanombres" --- nationals who lend their name to foreign enterprise in order to legalize it? Or is there some other reason why the obvious solution to this problem isn't on the table?

(5) Why didn't you take a camera?

Iain Scott

Fascinating... to best reason for reading random blogs around t'internet is to be presented with info you didnt know you were interested in!

I echo the above comment though: Why is Jordan in an exclusive club of importers and exporters of labour? Are not places such as the UK and US similar, in that they send out skilled engineers (etc.) and import low-skilled workers to do the stuff no one local wants to do?

Bernard Guerrero

Correction. "Set that puppy times the fee equal to current revenue (or better, if you really need to sell this thing) and solve for the optimal fee" should have a "times Jordan's population" in there.

The whole thing should boil down to Charters/person(a function of fee and red-tape) * Population * Fee = Current Revenue (or CR + whatever you need to get people to sign off on this)

Dennis Brennan

>Alternative: Just drop the fee to something nominal and go with a franchise tax based on assets or issued shares, ala Delaware.

Bernard- I know you know this, but basically every state in the U.S. does this-- Delaware still leads this race for other reasons.

Bernard Guerrero

Dennis,

It appears to me that the rates and types of business to which franchise taxes are applied (sometimes only financial institutions, f'rex) vary a great deal from state to state, so I don't know if it's fair to state that they all do "it".

That said, I agree that you can't claim Delaware's structure is particularly advantageous compared to other states. I believe a number of other states have lower rates, for instance, and that Delaware is not alone in having multiple methods of calculation. I'm merely tossing DE out there as a successful and well-known example of the concept. It seems like an easy way out of the minimum capital requirement problem.

Carlos

Reporting issues. If you were an investor, how much about your assets would you be willing to tell the Jordanian state? And if you were the Jordanian state, how would you confirm this, while maintaining a friendly business climate and not having the administrative costs go berserk?

Doug M.

Carlos, a company is required to file a financial statement every year with the Controller of Companies. The statements have to be approved by an auditor, and -- I am told -- will usually bear at least a nodding relationship to reality. In contrast to, say, Eastern Europe, where corporate filings have traditionally been shelved under "fantasy".

Note that while Jordan has its problems, gross abuse of corporate governance is not one of them. Again, sharp contrast to Eastern Europe.

Noel, Claudia is the photographer in the family. Path dependence and labor specialization.


Doug M.

Bernard Guerrero

Carlos, while Doug appears to have an answer to the reporting issue, I'll confess that I hadn't really considered it when I tossed that out there. I haven't done business in any place more corrupt than, say, Louisiana, so I just assumed that at least a decent read of corporate assets would be available.

I wonder if this might introduce moral hazard into the equation, though. If Jordanian books have been pretty clean, possibly it's because they haven't mattered as much? Is the corporate income tax efficient or widely dodged?

Carlos

Note that while Jordan has its problems, gross abuse of corporate governance is not one of them.

Woo! Go Jordan! Do you know how they avoided it?

Tony Zbaraschuk

I am definitely interested in hearing more of this sort of thing.

What is the current state of economic thinking in Jordan?

James Bodi

Interesting, Doug. Bermuda just scrapped its MCR this January. Didn't affect government fees though; they just dropped the lowest band down to zero, so even if you incorporate with a dollar's worth of capital, you have to pay $1800 a year. As to the foreigner "problem" Bermuda is quite frankly protectionist, having exempt companies that foreigners can own, and local companies that have to be 60% Bermudian owned. Only the latter can do business in Bermuda.

The comments to this entry are closed.