Waiting game

President Barack Obama wants to stop tax breaks for US firms outsourcing services to other countries. But that's no threat to India, writes The Times of India.

The Times of India

US companies with foreign subsidiaries can defer payment of federal taxes on profits made from them. If money made abroad is poured back into overseas operations rather than routed back home, a firm can put off payment indefinitely. If President Barack Obama has his way, such tax breaks will be denied to US firms outsourcing services to other countries. His stated aim is to protect American jobs — potential ones in "Buffalo, New York" he says are going to "Bangalore, India" — at a time of recession. Will he have his way? Since clamping down on outsourcing is easier said than done in a globalized world, there's no need for Indians to react with knee-jerk indignation. …

Even if the tax rejig came about, outsourcing would still be the more profitable option for many US companies compared to operating at home. The advantages for cost-cutting India offers in terms of its huge, young, educated and relatively cheap labour market will remain a lure. Besides, should business from the US be dented, India will have other opportunities, having established itself as a global IT-BPO hub. Moreover, R&D won't suffer since research by US multinationals will be exempted. …