Obama’s Announcement on Outsourcing “Protectionist”, says India Inc

Terming US President Barack Obama’s announcement to scrap tax incentives that encourages American firms to ship jobs overseas as “protectionist” and a  retrograde measure, the Indian IT companies have said that it is unlikely to dent business for Indian outsourcers but would hurt US companies having significant operations overseas.

President Obama, as he said, intends to make rules tighter for companies shipping jobs abroad so that they cannot defer paying taxes on profits as long as those earnings are ploughed back into the foreign subsidiaries.

According to the supporters of the tax reform plan, the existing provision allows US companies to avoid taxation indefinitely and gives them incentives to create jobs overseas instead of at home.

“This may actually end up reducing competitiveness of U.S. companies with global operations when compared to their European and Japanese counterparts,” National Association of Software and Service Companies (Nasscom), an Indian lobby group, said.

In a statement, it said that it is important to note that most large American companies have more than 50 percent of their revenues coming from markets outside the US and (they) would be affected by the proposed tax reforms, if implemented.

The Federation of Indian Chambers of Commerce and Industry (Ficci) has similar reaction to make. According to it, taking measures that would force companies to restrict their economic activities in one vision and not in the other is a retrograde step.

Ficci President Harsh Pati Singhania said while Obama’s move would have some impact on the US investment abroad and into India, in the long run this would only run counter to the interest of US corporations seeking global presence

Indian outsourcers such as Tata Consultancy Services and Infosys Technologies get half their revenue from the United States by providing a range of IT services to firms such as Citibank and General Electric.