Obama’s anti-outsourcing policy to hit Indian BPOs

Source: ndtv.com
In a move that will hit some 10 lakh Indian IT professionals and a sizable chunk of the country's BPO industry, US 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 yesterday 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 $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.