Obama’s Plan on Corporate Taxes Unnerves the Indian Outsourcing Industry

May 6, 2009
Obama’s Plan on Corporate Taxes Unnerves the Indian Outsourcing Industry
By HEATHER TIMMONS
NEW DELHI — President Obama’s proposal to change the American corporate tax system is winning few fans in India, where some say it is aimed at curbing the country’s outsourcing industry.

Perhaps that is because Mr. Obama specifically struck out at the epicenter of Indian outsourcing.

The president vowed Monday to overhaul a tax code that allowed companies to pay less tax, as he put it, to “create a job in Bangalore, India, than if you create one in Buffalo, New York.” One element to that change could be the elimination of a deduction for American companies when they invest in subsidiaries outside the United States.

American companies have tens of thousands of employees in India in wholly owned subsidiaries. Many of these Indian operations handle customer service and back-office functions, particularly for banks and credit card companies. American businesses employ thousands more in India by contracting work to local technology and outsourcing companies.

And recently, many American corporations have also expanded their sales, marketing and distribution in India to take advantage of the country’s fast economic growth and expanding middle class.

Many business people in India were upset by Mr. Obama’s tax proposal. The president of the Associated Chambers of Commerce and Industry of India, Sajjan Jindal, said it could “kill the spirit of competition.”

The Indian affiliate of CNN spent Tuesday afternoon asking economists and politicians whether Mr. Obama was “anti-India.” An editorial in The Times of India said Bangalore had become a “catch-all term to hang U.S. economic woes on.”

What is unclear, though, is what, if any, impact Mr. Obama’s proposed tax plan will actually have on jobs in India.

“It’s a tax disincentive to discourage outsourcing to countries like India,” said Uday Ved, head of tax issues at KPMG India. But according to Mr. Ved and other international tax experts, companies do not move jobs to India because the tax rate is lower; they do it because labor costs less.

“We still believe that the cost advantage to India is so high” that American companies will continue to move some jobs to India, Mr. Ved said.

Raymond J. Wiacek, chairman of the global tax practice at Jones Day, said, “I don’t think it’s going to make a bean’s difference to India.”

He added, “India is a highly skilled but inexpensive labor market,” and not one where American companies have been accruing enormous profits in their foreign subsidiaries.

Some big American companies have large numbers of employees in India. For example, General Electric has about 14,500 employees in India, I.B.M. more than 74,000, and Citigroup more than 10,000. In addition, India’s information technology and outsourcing companies employ about 2.2 million people, and American companies account for about 60 percent of their business.

“The jobs aren’t coming back to the U.S. as a result of this proposal,” Mr. Wiacek said. The tax proposal is “about revenues and that’s it.”

http://www.nytimes.com/2009/05/06/business/global/06tax.html?th&emc=th

This hits close to home for me because my job has been outsourced to India which is why I had to relocate to NC in 2006. Now this job I am doing (for the same company) is being outsourced as well. It is just a matter of time before I am laid off. It's why I have time to go on this site....my work is being done in India!

So part of me is supportive of Obama’s Plan on Corporate Taxes, but then I read the email I got below and I get confused about it. I definitely have mixed feelings about this issue! Oh and FYI, I am not a Republican!

From: Senator John Cornyn [mailto@gopsenators.com]
Sent: Wednesday, May 13, 2009 5:31 PM
To: [mod edit] xxxxx xxx
Subject: Higher taxes, weaker businesses



Dear Republican Friend,

This morning, the Politico published an op-ed I wrote regarding President Obama's proposal to increase taxes on American businesses doing business overseas:

The populists and protectionists want to demonize American businesses that invest overseas. The truth is that foreign investment helps create jobs for businesses in every sector of our economy. About 95 percent of the world's consumers live outside the United States, and American workers produce the high-quality goods and services that many of them want to buy. By investing in overseas markets, American businesses can deliver more of our products to foreign consumers and create more jobs here in America. According to the National Bureau of Economic Research, each dollar that U.S. businesses invest in foreign nations generates $3.50 of additional investment here at home.

Read the full text of the piece here, and then help me defeat this liberal agenda by supporting the NRSC's fight to retake a Senate majority today. Your donation of $100, $50, or even $25 provides vital support to Republican efforts to keep taxes low and our economy strong.

Our government taxes all corporations at a higher rate than most industrialized nations, and our complex tax code is badly in need of repair. American businesses operating overseas contribute $2.5 trillion to our economy and employ more than 22 million Americans, yet President Obama's recent proposals do more harm than good. Eliminating tax deferrals which allow American companies to be competitive abroad puts them - and our economy - at risk.

Proposals like those that the President has put forth risk American competitiveness, and American jobs. Help Republican Senators provide a vital check-and-balance to these protectionist and populist policies today. Support the NRSC - every donation, no matter how small it may seem, is vital to this challenge.

Sincerely,

Senator John Cornyn
Chairman
National Republican Senatorial Committee

P.S. With each day that goes by, President Obama and Congressional Democrats are advancing their radical liberal agenda. Help us keep American businesses strong. Support us with your donation of $100, $50, or even $25 today.



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Sen. Cornyn has never been on of my most favorite senators. He seems not to really understand supply and demand. We have an over demand for jobs by the 8.9 percent unemployment rate. Meanwhile our supply of jobs is continually being outsourced or cheap labor is being insourced. It is not making sense to me, except the Republican support for corporations so they will get lots of campaign contributions. As a card-carrying Republican, I am so fed up with everything, especially since the Repubs have seem to have lost their message.