Bangalore: US President Barack Obama’s proposal to raise taxes on profits earned overseas would only hurt US firms and not have much impact on India’s outsourcing industry, an industry lobby group has said.
“This may actually end up reducing competitiveness of US companies with global operations when compared to their European and Japanese counterparts,” National Association of Software and Services Companies (Nasscom) said in a emailed statement on Tuesday.
Talking tough: US President Barack Obama. Charles Dharapak / AP
Global companies in India are subject to a tax rate of 33.9% and the impact of the proposed reforms on them would be marginal, it added.
On Monday, Obama said many US firms were exploiting loopholes in tax codes to avoid paying taxes on profits earned overseas, some by using tax havens and some by creating jobs in low-cost countries such as India. “And it’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York,” he said.
In April, US legislators proposed curbs on H-1B and L-1 visas—work visas used by employees of Indian software firms to work in the US.
Cisco Systems Inc., a US network equipment firm that employs some 5,000 people in India, said it would continue investing in India and China. “We are supportive of the government’s efforts towards aiding recovery of the US and global economies. We continue to invest in US and from the emerging countries focus, China and India will be in our first wave where we will continue to invest during the downturn,” it said.
Infosys Technologies Ltd said: “We do not believe that it has anything to do with IT outsourcing done by US corporations.”
IBM Corp., Hewlett Packard Co. and Tata Consultancy Services Ltd declined comment.