M A I N   N E W S

Industry decries Obama’s move
Bhagyashree Pande
Tribune News Service

New Delhi, May 5
US President Barack Obama’s protectionist measures to save the jobs of his countrymen has drawn ire of Indian companies who are the main beneficiaries of outsourcing. In India, the trading relationship reaches to various levels. There is outsourcing of IT-related services by the US companies, which is a major employment generator here. Then there is issue of H1 B visa, besides the issue of Indian companies working in countries that the US has declared hostile (Iran).

But what has really got the wrath of Indian companies is the latest statement of Obama, not allowing tax benefits to companies that outsource jobs. According to a McKinsey-Nasscom study, the Indian software and outsourcing industry employs around two million people, earning revenues worth $52 billion, of which nearly $48 billion comes from exports.

It is a US-US issue rather than cutting outsourcing or offshoring. But, the current law in the US states that any income that is earned outside that country is not taxed until such time it is brought back into the US. Obama’s proposal aims to alter that to raise the revenues of the US government, said IT industry body Nasscom.

As far as India is concerned, global companies that earn profits here are subject to a tax rate of 33.9 per cent (including surcharge and cess) and the impact of the proposed reforms on them would be marginal.

Assocham president Sajjan Jindal advised Obama administration to reconsider its decision as the US would be the biggest loser in practicality. “Not only America, but the entire world has become the victim of current meltdown and at this crucial juncture, resorting to protectionism tendencies will kill the spirit of competition and dilute spirits of World Trade Organisation,” he said.

Ficci president Harsh Pati Singhania said such a move, if implemented, would constrain US companies, as they move ahead to benefit from the advantages with regard to production, distribution and marketing offered in different parts of the world. “In this era of globalisation, a more meaningful measure would have been to evolve a consensus on harmonising the national taxation systems,” he added.

Nasscom also states that other nations, especially Japan and European countries, are moving to a territorial system that taxes only corporate profits earned within their borders and the latest US proposals are contrary to the trend.

IT sector cautious

Choosing not to be seen on the wrong side of the world's largest economy, the Indian IT industry played down the impact of US President Barack Obama's proposal to disallow tax sops to firms outsourcing US business to India's $ 47-billion software and BPO industry.

IT body Nasscom and software bellwether Infosys Technologies were joined by the apex industry chamber CII in not making an issue out of Obama's tough tax proposals to make American firms move their jobs from Bangalore to Buffalo city at the US-Canada borders.

CII Director General Chandrajit Banerjee had a word of advice for the American administration on the ills of protectionist measures, and said, "The US is going through a deep recession and we understand the steps taken...to rewrite their tax code." Banerjee hoped for a fast recovery of the US economy stating India and the rest of the world have stake in it. "It is known that India is a net investor in the US," he said. However, FICCI and Assocham were more candid in their disapproval of the American policies describing them "retrograde and protectionist". — PTI