OBAMA HITS IT HARD US TAX PLANS TO BITE INDIA INC
The Economic Times, May 6, 2009, Page `1
Expansion drive of US firms with captive ops may take a knock
Our Bureaus BANGALORE NEW DELHI MUMBAI
A day after US President Barack Obama said his administration would end tax breaks for American companies expanding their overseas operations, several US multinational firms and Indian outsourcing companies expressed concerns about any potential legislation aimed at curbing offshoring of IT and back-office projects to countries such as India.
While companies such as TCS, Wipro and Infosys are preparing to cope with anti-offshoring sentiments gaining momentum in the US—the world’s biggest market for software services—executives at large US firms with captive operations said ending tax-deferral could impact their expansion plans.
India’s second-biggest software exporter Infosys, which serves customers such as American Express and Bank of America, said it is monitoring the situation. “Right now, I do not see any impact on our business,” Infosys CEO S Gopalakrishnan told ET on Tuesday.
But President Obama’s reference to Bangalore in his speech has made the IT industry nervous. Mr Obama on Monday said his administration wanted to fix the loopholes in the country’s tax systems. “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,” he said.
A top executive of an Indian IT company said the US president’s utterances will impact sentiment and ‘vitiate the atmosphere’. His statement on Monday is the latest in a series of remarks he has made against outsourcing and job losses in the US from the time he began his presidential campaign almost two years ago.
US companies have to pay almost 35% corporate tax on income generated in the country. “Under current laws, companies don’t pay taxes to the US government on income earned abroad until they bring the money back to their country. President Obama wants to reform this part of the law (which is called “deferral”) ,” Rosanne Altshuler, a Rutgers University economist specialising in international taxation, told ET in an interview last month.
AMERICA FIRST
Top US firms, including Citigroup, derive over half their revenues from overseas markets
By taxing foreign earnings of US firms, Obama wants to discourage offshoring of jobs
New tax will help US raise $210 b in tax revenues over next few years
Companies such as Citi, JPMorgan & GE outsource work to India not to evade taxes but leverage cost advantages
Back-office IT projects can be done at half of US costs in India
Captives in India export back-office projects worth $4.8 b annually
The Economic Times, May 6, 2009, Page `1
Expansion drive of US firms with captive ops may take a knock
Our Bureaus BANGALORE NEW DELHI MUMBAI
A day after US President Barack Obama said his administration would end tax breaks for American companies expanding their overseas operations, several US multinational firms and Indian outsourcing companies expressed concerns about any potential legislation aimed at curbing offshoring of IT and back-office projects to countries such as India.
While companies such as TCS, Wipro and Infosys are preparing to cope with anti-offshoring sentiments gaining momentum in the US—the world’s biggest market for software services—executives at large US firms with captive operations said ending tax-deferral could impact their expansion plans.
India’s second-biggest software exporter Infosys, which serves customers such as American Express and Bank of America, said it is monitoring the situation. “Right now, I do not see any impact on our business,” Infosys CEO S Gopalakrishnan told ET on Tuesday.
But President Obama’s reference to Bangalore in his speech has made the IT industry nervous. Mr Obama on Monday said his administration wanted to fix the loopholes in the country’s tax systems. “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,” he said.
A top executive of an Indian IT company said the US president’s utterances will impact sentiment and ‘vitiate the atmosphere’. His statement on Monday is the latest in a series of remarks he has made against outsourcing and job losses in the US from the time he began his presidential campaign almost two years ago.
US companies have to pay almost 35% corporate tax on income generated in the country. “Under current laws, companies don’t pay taxes to the US government on income earned abroad until they bring the money back to their country. President Obama wants to reform this part of the law (which is called “deferral”) ,” Rosanne Altshuler, a Rutgers University economist specialising in international taxation, told ET in an interview last month.
AMERICA FIRST
Top US firms, including Citigroup, derive over half their revenues from overseas markets
By taxing foreign earnings of US firms, Obama wants to discourage offshoring of jobs
New tax will help US raise $210 b in tax revenues over next few years
Companies such as Citi, JPMorgan & GE outsource work to India not to evade taxes but leverage cost advantages
Back-office IT projects can be done at half of US costs in India
Captives in India export back-office projects worth $4.8 b annually
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