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Obama’s Outsourcing Policy

Obama Outsourcing Policy

United States President Barack Obama served a noticed that he would end tax breaks to American firms that outsource jobs abroad. He mentioned that the step was to restore a sense of fairness and balance to the US tax code by ending the tax breaks for companies that outsource jobs overseas.

The move spells bad news for Indian IT and BPO Sectors but immediate reactions from Indian firms suggest that there is little cause for worry. Around a thousand firms which have outsourced jobs are likely to be affected by the move to scrap a provision in the tax laws that allow them to pay taxes on profits from outsourced jobs. Obama’s fellow democrats had been asking for an abolition of this provision for a long time to stop encouraging American companies to send jobs overseas.

Many of the major companies have outsourced jobs to India including General Electric, Hewlett-Packard, Microsoft, Motorola, Honeywell, Pepsico and IBM. The move is said to hurt India’s BPO sector as the removal of tax breaks would discourage American companies from outsourcing jobs to India.

Outsourcing has become a significant political issue in the US as nearly 5 million Americans have applied for unemployment benefits and many others are working part-time because of lack of full-time work. Keeping the issue in mind, the new policy on outsourcing was notified that discourages outsourcing.

However, the exact policy isn’t clear and that is further vexing for India’s outsourcing industry. Obama has also expressed intentions of modifying the use of US work visas, especially H-1B visas. The budget focuses on implementing international enforcement, and tax reform policies but indicates that the tax policy has not been worked out yet and is unlikely to be public before April.