Obama's tax plan could push up outsourcing cost 50%

6 May 2009, 0052 hrs IST, Prabhakar Sinha, TNN

NEW DELHI: American firms could see a 50% rise in the cost of outsourcing business processes to India if President Barack Obama's new tax proposals are accepted. Even though outsourcing will still make business sense, industry watchers concede the move could act as a dampener.

Obama has proposed to tax expenditure by US companies on availing services from outside the country from 2011. The move has been proposed to discourage outsourcing and contain the flight of jobs to other countries.

According to Uday Ved, head of global tax consultancy firm KPMG, payments by US companies for services outsourced to India or other countries are treated as normal expenditure and deducted from the company's revenue at present. They are not required to pay tax on that amount.

For example, if a company spends $100 on outsourcing, it will save about $35 as corporate tax, said Ved. So, net outgo of money will only be $65. However, if Obama's new tax proposal goes through, the company will not be able to save the $35. So the net outgo will be $100 instead of $65 - or 53.86% more than the present cost.

However, Aparup Sengupta, chief executive officer of BPO company Aegis, pointed out that 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.

Besides the cost arbitrage, the availability of trained manpower will also be an issue in the US, said Sengupta. Particularly in the IT space, there is a shortage of talent in the US. So, regardless of whether the tax is levied or not, US companies will have to outsource to remain globally competitive.

http://timesofindia.indiatimes.com/Obamas-tax-plan-could-push-up-outsourcing-cost-50/articleshow/4488704.cms

There is no fucking "shortage in the U.S."

:hi:

you know, cause... um... cause they are.

It hurts the nation.

Given the lobbyists of the various corporations that have found how profitable outsourcing is I suspect Congress will probably do absolutely nothing with it and I have to wonder if Obama already knows that.

As in "sounds good and diverts attention from what isn't going on at the Justice Department."

with President O's tax haven snipe hunt idea because it would hurt some of the big corporations that do business in California.

My gawd, if there was ever a populist idea that could get most American workers behind it, you would think this would be the one. But, watch and see, the corporate propaganda ministry will roll into high gear to explain how this is anti-American.

Aaarrrggghhhhh!!!!!

(Taken from another poster/thread)

Cisco
Intel
Comcast
Boeing
Viacom
Siemens
AT&T
Covad
Time Warner
Blue Cross Blue Shield
E*Trade
QualComm
T-Mobile
BellSouth
EBay
Genentech
MCI
Hewlett Packard
FedEx
SAP
National Semiconductor
Yahoo
SILICON VALLEY LEADERSHIP PAC FEDERAL
MICROSOFT CORPORATION
SONY
RAYTHEON COMPANY

http://www.campaignmoney.com/committee.asp?candidateid=S2CA00286&cycle=04&cnt=166&amt=604759&cname=Barbara+Boxer

true of all of our elected officials.

isn't any short of talent here. By experience I remember when my firm posted on behalf of our big corporations/clients "available" jobs in newspapers, magazines, radio, and workforce agency recruiting talented american workers. I can attest that hundreds and hundreds of americans applied for the specific jobs I posted and all seemed qualified to the jobs. It was all a LIE. That posted available job at our client's corporation had already a name and last name. A foreigner-.

This is the part that I hated the most about my job. I did enjoy helping people obtain their dream to lawful legal residence, the downside of this job was to overlook at the many qualified americans who applied for a "legal" job which already had a name..

I no longer work in immigration.

had me write specialized job ads for the very same reason, to retain H-1B workers. I no longer work there.

"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.

Besides the cost arbitrage, the availability of trained manpower will also be an issue in the US, said Sengupta. Particularly in the IT space, there is a shortage of talent in the US. So, regardless of whether the tax is levied or not, US companies will have to outsource to remain globally competitive."

:eyes:

When I see that our government appears to be trying to help its citizens have better lives I'm really surprised. I get that "Wait a minute! What's the catch?" feeling. That "too good to be true" feeling. That feeling I get when I'm scratching that silvery resin off of a sweepstakes ticket at a fast food joint. Five shamrocks means I win a million dollars, and I've already scratched off four.

It's that feeling that other people may fall for this, but I know better. I know there must be thousands of these disappointing "four shamrock" tickets, and maybe three tickets, at most, with that elusive fifth.

I know that winning just LOOKS easy. Easy if you believe these tickets are fair. If you think they all have equal numbers of hearts, stars, happy faces, diamonds, and shamrocks, or whatever nifty little symbols corporations like to put onto these perforated cardboard rectangles of regret. If only there were one more shamrock.

That's how I feel when I see now that our president is fighting outsourcing. Fighting most every American corporation that exists. Ever printed one of those clever little pieces of perforated hope. I know those greedy CEOs, their lobbyists and their politicians will fight this tooth and nail.

I've scratched off enough silvery crud to know what's underneath. But I know it's at least possible to win this game, too. I remember how surprised I was when I had that "four shamrocks" feeling and I actually won. I remember the day. Even the date. If anyone can defeat the corporate greed that's crippling our nation, it.s the man who got us our fifth shamrock on that day -- November 4, 2008.

:hi: