There is uproar in outsourcing circles after US president Barack Obama announced a proposal to tax expenditure by US companies on offshored services, beginning in 2011. The move is seen as an attempt to contain the flight of jobs to other countries, with the aim of boosting the ailing US economy.
The tax plan is projected to raise up to US$210 billion. According to the Obama administration, US firms exploit tax loopholes to pay an average of only 2% on their foreign profits, costing the US taxpayer tens of billions of dollars each year.
India is estimated to provide at least 50% of the world’s offshored legal, business and IT services, across a plethora of industries. The country’s leading outsourcing lobby, the National Association of Software and Services Companies (Nasscom), said that if implemented, the new tax rules “would impact American headquartered companies with overseas operations”.
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