The Hindu News Update Service
News Update Service
Tuesday, May 5, 2009 : 1740 Hrs
Obama unveils anti-outsourcing policy, Indian BPOs to be hit
Washington (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, Mr. 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," Mr. Obama said on 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.
Mr. 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, Mr. 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," Mr. 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."
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