Bush to sign bill that stops outsourcing, but India is pissed

[Ripsnort]

India attacks US on plan to ban outsourcing
By Khozem Merchant in Mumbai
Published: January 25 2004 19:11 | Last Updated: January 25 2004 19:11
 
 
India's technology industry has attacked proposed new US legislation that bans the outsourcing of federal work to low cost countries arguing it is a protectionist measure contrary to the spirit of free trade.

 
The move by the US Senate coincides with decisions by a number of foreign companies to halt further outsourcing to India because of a new domestic tax ruling that would enable the Indian government to tax part of their worldwide earnings.

The US bill, which was passed by the Senate of Friday but has still to be signed by President George W. Bush before it becomes law, is the most significant attempt to stop outsourcing, a fast-growing industry trend that has led to the loss of thousands of highly-paid technology jobs in the US and become a hot political issue in a US election year.

Although US federal contracts account for only 2 per cent of India's IT earnings, the bill sends a worrying message to the Indian outsourcing industry, which has been lobbying hard to stave off protectionism.

Arun Shourie, Indian's information technology minister, said the bill damaged the outlook for talks on freer multilateral trade. Kiran Karnik, president of Nasscom, the umbrella body for Indian IT, said he "hoped wiser counsel would prevail" before the law was enacted.

The revenues from India's technology industry are forecast to expand by a third to $15.5bn in the year to March, with two-thirds of the growth coming from the US, as more companies in North America and elsewhere leverage India's high IT skills and low costs.

But US companies such as JP Morgan and General Electric, which have outsourced thousands of jobs to India, could be casualties of the controversial rule on the taxable status of foreign companies' outsourced units. This week Nasscom said three unidentified foreign companies with back office operations in India had frozen future outsourcing until "there was clarity".

The government circular, which is binding on the tax-collecting authorities, says a foreign company's global income would be taxable under India's double-tax treaties if that company's outsourced unit in India carries out "core revenue-generating activities." Non-core activities conducted at arm's length and at fair market value would be exempt.

Accountants say the ruling introduces artificial distinctions between core and non-core work. "This raises technical ambiguities that could lead to litigation," said one tax expert.

Experts say an accepted principle of global accounting norms is that double-tax treaties override domestic tax regulations. Foreign companies could therefore appeal to double tax pacts, which prevent the imposition of taxes from different countries on the same business, to circumvent the circular.

Nasscom has protested to the Indian government, arguing the measure is contrary to the government's tax-friendly stance towards a nascent, job-creating industry.

 

[Saurdaukar]

Maybe we should consult with the UN?

[crowMAW]

As some of you know, I left government service and am now working for one of the worlds largest financial institutions.  I am involved with my company's offshore outsourcing initiative.  I have no doubt, based on the success of a pilot project, that upwards of 80% of our IT and customer service employees in the US are at risk of having their positions outsourced offshore.  Our company has a target already set for the number of positions to be outsourced for FY04-05.  The bids from the offshore service providers are in, and the savings are huge.

I'm not at a level in my organization where I can stop this...and quite honestly, my job is to help the company lower costs and run more efficiently...and offshoring will certainly help the company lower costs, so I'm not sure what arguments I could use anyway.

But, I can give some folks things to contact their US congressional team about.  Identity theft seems to be a major concern for many when dealing with financial info.  Right now, if a US employee of a financial institution uses your personal info improperly, then they have committed a crime for which US authorities can prosecute.

If Hajji in New Deli decides that he is tired of his $7k a year job as a customer service rep for Massive Bank of North America and takes your personal info for illegal gain of $50k, then he can run pretty much scott free.  The fairly new extradition treaty between the US and India is very weak.  And it would still depend on the India police to track Hajji down.

So if you want to slow offshoring down some, then ask your US legislators to support a bill that makes it illegal to export personal info to offshore service providers.

[kappa]

How much 'Federal' work have we been outsourcing to India??

This is just more Ripsnort propaganda material.. This says nothing of private companys such as IBM and the like outsourcing american jobs.. Nothing more than something that 'could' happen...

[Ripsnort]

"Ripsnort Propaganda" ?? LOL! I report, you decide, dude.

Um, the article was quite clear its FEDERAL jobs.

[GtoRA2]

They should apply this bill to all US companies.

outsourcing support, customer service and IT **** to india, is just like a Burger king sticking an indian guy who does not speak english very well on the drive through. It will hurt the companies in the long run cause the only benifit to this is lower cost.

Customers HATE it.

[kappa]

we'll never see in our lifetime Bush signing any such bill Gtora.. I wish i were wrong, but that would be our president representing the people and not big business.. It simply wont happen...

I hope your right in your thinking that it will hurt the US companys sending american jobs abroad.. As if any americans will reap the benefits of these companys saving money.. Perhaps newer and better companies will be able to rise up and replace the unsupporting american firms forgeting their alegence(sp)...

[Pongo]

In terms of the costs and advantages of moving customer support to india there is some debate. But of business system development and operations there is no debate. The costs are so much smaller and the quality of the developers so high that you see the exodus that we have seen of large developement work going to india. Bank systems, Airline systems, goverment systems.

That is why the Indians want to tax some of these operations. An airlines whole booking and reservation and air miles systems could (do) reside in India, phone support is in india, booking agents. the whole deal. Well since those booking systems are often one of the most valuable comodities the company has where does the airline exist? Why shoudnt it pay Indian income tax?

[Gunslinger]

I had to deal with this just last night.....20 minutes on hold for a guy that spoke broken english that couldnt answer my question.

Kappa lighten up man...it said clearly in the story that the number was 2%   hardly propaganda compared to this

we'll never see in our lifetime Bush signing any such bill Gtora.. I wish i were wrong, but that would be our president representing the people and not big business.. It simply wont happen...

[kappa]

I would have not considered it as such had the thread title been 'Federal jobs'...  Otherwise it painted the picture that Bush was actually fighting for american jobs... Not that Bush is 100% responsible for american jobs being sent overseas, hes not standing in the way either... Posting this thread is meant to show Bush in a kind light, but infact, this will not help the real problem..

[Gunslinger]

Originally posted by kappa
I would have not considered it as such had the thread title been 'Federal jobs'...  Otherwise it painted the picture that Bush was actually fighting for american jobs... Not that Bush is 100% responsible for american jobs being sent overseas, hes not standing in the way either... Posting this thread is meant to show Bush in a kind light, but infact, this will not help the real problem..

since when are federal jobs not AMERICAN jobs?

 its not like he can tell business not to send work overseas...the only thing he could do to limit that would be incentives an such.....but than people like you would just see him catoring to big business.

IMO its a start and a welcome one!

[Ripsnort]

Originally posted by kappa
I would have not considered it as such had the thread title been 'Federal jobs'...  Otherwise it painted the picture that Bush was actually fighting for american jobs...

Well then be consistent Golly-geemit, theres a million threads with misleading subjects, get to work!

[kappa]

Originally posted by Ripsnort
Well then be consistent Golly-geemit, theres a million threads with misleading subjects, get to work!

LoL  well, im sure I'd prolly be responsible for a few.. But w/ your 13 Thousand post... LoL  nevermind...

[gofaster]

Federal work = federal tax money = federal taxpayers = federal taxpayers should be doing the work.

Plus, from a national defense perspective, its a good idea to keep the work within the border.

Funny how it only mentions IT work, though.

[Staga]

Originally posted by GtoRA2
They should apply this bill to all US companies.

outsourcing support, customer service and IT **** to india, is just like a Burger king sticking an indian guy who does not speak english very well on the drive through. It will hurt the companies in the long run cause the only benifit to this is lower cost.

Customers HATE it.

Are you a communist?
Stock holders own the corporations  and it's their right to get best revenue for the money they invested.