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By : sumitra dutta, Consultant, Keane
Industry : Technology Consulting Functional Area : Business Processes
Activity:  4 comments  875 views  last activity : 07 06 2010 20:18:04 +0000
 Refer 375

After doing some research, I was able to find what large section of both corporate India and US believe on Obama's New Tax plan......

Tax Point of View

President Obama said that his new tax plan will do a lot of things including create more US jobs. Obama said that the government would offer a tax cut to companies that do their research and development in the United States. And that will "jump-start job creation," he said.

However, most tax policy experts differ with the US Prez here. They feel that the proposals, if implemented, could raise revenue for the government but are unlikely to boost US jobs.

Eric Toder, a fellow at the liberal Urban Institute and former assistant secretary of tax analysis for the Treasury Department, wrote in the Tax Policy Center's blog Tax Vox, "Employment is determined by overall demand for goods and services, not by targeted tax and spending provisions."

It will hurt the competitiveness of US MNCs

Most experts feel that the President Obama's tax plan will badly hurt the competitiveness of US MNCs. Critics also contend that increasing the tax bite on US companies will put them at a disadvantage with their foreign competitors.

As Indian software body National Association of Software and Service Companies (Nasscom), said, "This may actually end up reducing competitiveness of US companies with global operations when compared to their European and Japanese counterparts."According to analysts what Obama’s new tax plan fails to gauge is that US tax policy is not the only factor a company weighs in deciding whether to invest overseas.

Why American Companies will prefer Outsourcing

As Aparup Sengupta, chief executive officer of BPO company Aegis, said, American companies save 60%-75% by outsourcing their back office operations to countries like India. The savings are higher if high-end operations are outsourced.

Sengupta said that in general, a service which costs around $48 per seat per hour in the US is accomplished at $11-12 per seat per hour in India. So, US companies save almost 75% by outsourcing their activities to India. The savings in high-end BPO services are even higher as the fixed cost in all the cases remains the same and the only increment is the marginal increase in wages of trained manpower.

Shortage of talent in the US

"It is wrong to assume that we are outsourcing for evading taxes - we continue to hire more workers here because traditionally, it's been very difficult to find professionals with adequate skills in the US," said a senior executive at one of the captive centres who did not wish to be identified because his company does not allow media interviews.

Also, according to tax experts, companies do not move jobs to India because the tax rate is lower; they do it because labor costs less.

It seems many past attempts to pass similar laws have failed. This proposed tax plan has met with severe criticism from a large number of US companies. Business groups in the US have assailed the proposal, arguing that it would subject them to far higher taxes than their foreign competitors must pay and ultimately endanger US jobs.........

 Top Comment : Ajay Ziz   | 05 12 2009 08:45:08 +0000
obama and obama 's all the plans can succeed only if the jews who are majority stakeholders in 85 % of the american MNC's will let him have his way.
4 comments on "Mr Obama's new tax plan will not hurt Indian IT"
  Commented by  ATMA RAM CHAVALI, MANAGER IT, SBH    | 01 29 2010 17:08:28 +0000
good input, american companies really outsource to India because we have talented pool at a cheaper rate when compared to their per hour pay
  Commented by  Nanjappa M.G., Legal - Head, Cafe Coffee Day    | 06 24 2009 04:31:36 +0000
Rating : +1 
The Tax Plans of any given year of any country will only be felt after a few Years later, as the implementation processes will take time. Mere announcements are no changers of any ecomonics as the fine print are not usually eloborated in the Tax Policy. What we need in India is to have a better Tax Policy that are more Industry Friendly. We need to reduce the Lending rates of the Banks for better and faster growth & investment.  
  Commented by  aditya ghare, Multimedia Designer & Developer, Final Edit    | 05 12 2009 11:22:52 +0000
Thanks for the input, I liked the last part, best.
  Commented by  Ajay Ziz, Dy. Registrar, university of jammu    | 05 12 2009 08:45:08 +0000
Rating : +1 
obama and obama 's all the plans can succeed only if the jews who are majority stakeholders in 85 % of the american MNC's will let him have his way.
Add your comment on "Mr Obama's new tax plan will not hurt Indian IT"

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