Obama unveils anti-outsourcing policy, Indian BPOs to be hit

Lalit K Jha

Washington, May 5 (PTI) In a move that will hit some 10
lakh Indian IT professionals and a sizable chunk of the
country's BPO industry, President Barack Obama has unveiled
new proposals to end tax breaks for American companies that
shipped jobs overseas to countries like India.

Meeting one of his major election promises, Obama said he
will end the tax incentives to those US companies which
created jobs overseas in places like Bangalore. Instead, the
incentives would now go to those creating jobs inside the US.

"For years, we've talked about ending tax breaks for
companies that ship jobs overseas and giving tax breaks to
companies that create jobs here in America. That's what our
budget will finally do," Obama said Monday at the White House
announcing the international tax policy reform.

"We will stop letting American companies that create jobs
overseas take deductions on their expenses when they do not
pay any American taxes on their profits," he said.

Obama said his administration will use the savings to
give tax cuts to companies that are investing in research and
development in the country to jump start job creation, foster
innovation, and enhance America's competitiveness.

The new tax laws are expected to hit countries like
India, China and Philippines, where US companies have been
outsourcing their work.

Nearly 60 per cent of Indian IT-Business Process
Outsourcing industry caters to US companies, according to
latest figures. India's BPO industry employs over 17 lakh
professionals.

Hitting hard at the current taxation system, to which he
had been very critical since his election days and as a
Senator, Obama said the current tax code was "full of
corporate loopholes" which made it easier for American
companies to flout the law.

"It's a tax code full of corporate loopholes that makes
it perfectly legal for companies to avoid paying their fair
share. It's a tax code that makes it all too easy for a number
-- a small number of individuals and companies to abuse
overseas tax havens to avoid paying any taxes at all.

"And it's a tax code that says you should pay lower taxes
if you create a job in Bangalore, India, than if you create
one in Buffalo, New York," Obama said.

Reiterating his campaign rhetoric, the US President said:
"The way we make our businesses competitive is not to reward
American companies operating overseas with a roughly two per
cent tax rate on foreign profits; a rate that costs taxpayers
tens of billions of dollars a year."

Obama said he wants US companies to remain most
competitive in the world. "But the way to make sure that
happens is not to reward our companies for moving jobs off our
shores or transferring profits to overseas tax havens," he
said.

He also announced a set of proposals to crack down on
illegal overseas tax evasion, close loopholes, and make it
more profitable for companies to create jobs here in the US,
Obama said his series of tax reforms would save USD 210
billion in the next 10 years.

Under new measures, American companies would also have
to disclose before the IRS details of the income American
citizens are generating in overseas accounts.

"For years, we've talked about stopping Americans from
illegally hiding their money overseas, and getting tough with
the financial institutions that let them get away with it," he
said. PTI