India Inc believes the move by the Barack Obama administration to reduce tax breaks for US firms that ship jobs overseas will hit American companies more than impact on the Indian outsourcing industry.
“It’s a more US-US issue rather than one aimed at stopping outsourcing, or off-shoring, or anything to do with India,” said Som Mittal, president of the Nasscom, a representative body for the industry.
“If you look at Indian companies operating in the US, or elsewhere, they work there and pay taxes there. Hence, it is not about stopping outsourcing, or off-shoring, but just to collect taxes,” Mittal told IANS.
His comments came after President Barack Obama said Monday that the current US tax system gave US-based multinationals that shipped jobs to places like India an unfair advantage over other domestic rivals and wanted corrective steps.
“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, explaining why he intended to close tax loopholes and crackdown on overseas tax havens.
“I want to see our companies remain the 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.”
According to a McKinsey-Nasscom study, the Indian software and outsourcing industry employs some two million people, earning total revenues worth $52 billion, of which nearly $48 billion comes from exports.
The Confederation of Indian Industry also felt that the remarks were more in the nature of posturing and that it was not intended at curbing outsourcing of work by US firms to Indian companies.
“It’s an internal issue. It will only reduce their competitiveness,” said Hari Bhartia, vice president of the chamber. “It is a populist posture. Perhaps Obama’s intention was not the same. However, it sends a wrong message.”
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