US President Obama’s proposal to scrap tax incentives that encourage American firms to ship jobs overseas is unlikely to affect Indian outsourcing companies. Since, most of them are registered in India and they do not enjoy any tax benefits in the US. But it will definitely affect large American companies who have tens of thousands of employees in India in their wholly owned subsidiaries. Many of these Indian operations handle customer service and back-office functions, particularly for banks and credit card companies. American businesses employ thousands more people in India by contracting out work to local technology and outsourcing companies.
President Obama vowed to overhaul a tax code that allowed companies to pay less tax to, as he said, “create a job in Bangalore, India, than if you create one in Buffalo, New York.” One major element to that change could be the elimination of a deduction that American companies get when they invest in subsidiaries outside the United States.
Some big American companies have large numbers of employees in India, in part because of its low labor costs. General Electric has about 14,500 employees in India, I.B.M. more than 74,000, and Citigroup more than 10,000. In addition, India’s information technology and outsourcing companies employ about 2.2 million people, and American companies account for about 60 percent of their business.
And recently, many American corporations have also expanded their sales, marketing and distribution in India to take advantage of the country’s fast economic growth and expanding middle class.
It is still unclear, whether Obama’s proposed tax plan will actually translate into massive job losses in India.
But, it’s a tax disincentive to discourage outsourcing to countries like India. And more significantly companies do not move jobs to India, China or Philippines because the tax rate is lower, they do it because labor cost is less here and that still remains the same.
President Obama vowed to overhaul a tax code that allowed companies to pay less tax to, as he said, “create a job in Bangalore, India, than if you create one in Buffalo, New York.” One major element to that change could be the elimination of a deduction that American companies get when they invest in subsidiaries outside the United States.
Some big American companies have large numbers of employees in India, in part because of its low labor costs. General Electric has about 14,500 employees in India, I.B.M. more than 74,000, and Citigroup more than 10,000. In addition, India’s information technology and outsourcing companies employ about 2.2 million people, and American companies account for about 60 percent of their business.
And recently, many American corporations have also expanded their sales, marketing and distribution in India to take advantage of the country’s fast economic growth and expanding middle class.
It is still unclear, whether Obama’s proposed tax plan will actually translate into massive job losses in India.
But, it’s a tax disincentive to discourage outsourcing to countries like India. And more significantly companies do not move jobs to India, China or Philippines because the tax rate is lower, they do it because labor cost is less here and that still remains the same.
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