May

11

US President Barack Obama strikes me, and I’m sure millions of others, as a man of his word so it is no shock that he is keeping true to take action on the farming of work abroad by US companies.

Early on in his campaign for the presidency, President Obama has cracked down on ‘outsourcing’ and ‘off-shoring’ as one of the many culprits that lead America to its present economic state. However how does his recent tax agenda really affect the global business of ‘outsourcing’?

According to some perspectives, not a whole lot.

Here are some points why off-shore services providers will not be greatly affected by President Obama’s decision to discourage “outsourcing”.

It will impact only American companies

Obama’s proposition only applies to businesses under the legal jurisdiction of the US.

However, “outsourcing” occurs on a global scale where multinationals, small-to-medium enterprises and even certain individuals from Europe, Asia, South America and Africa  can outsource or avail of services off-shore.

US companies pay taxes NOW, NOT later

Obama’s proposition only enforces US companies to immediately pay their corporate taxes on revenues earned overseas, reversing the Bush-era tax policy where the companies can pay the tax later.

If this change pushes through, it will earn the Obama administration about USD 210 billion from these corporate tax payments within the next 10 years.

Outsourcing is about making profits

US business would have to yield once this tax policy change is implemented and perhaps some, particularly the smaller businesses, would have to stop outsourcing.

On the whole, there could be a slowdown but not a complete shutdown. Outsourcing is also about making profits from quality services and products, not only saving costs from tax payments.

Mergers or relocations could be the loopholes

Heard about the poor cattle rancher whose land was plagued with rattlesnakes?  Instead of eradicating the problem he decided to embrace it and earns millions in a lucrative business in milking rattlesnakes for their venom to be used for medicine and medical research, their skins for their leather and meat as a local delicacy. Talk about being business savy! Turning lemons into lemonade.

The same with Obama’s tax proposition, savvy business heads and execs would just have to merge their companies with foreign multinationals or relocated their base of operations in other countries with more aggreeable tax systems.

Conclusion

Unless every government in the world follows the example of the Obama administration’s action on outsourcing, which could lead to that delicate protectionist atmosphere more of a deterrent to economic prosperity, I’m beginning to see that outsourcing is here to stay, in the US, in the World. Don’t you?

Outsourcing Solutions, Inc. – your outsourcing partner!

References:

  1. Srivastra, Mehul. “Obama Vs. Outsourcing.” 06 May 2009. Business Week. Accessed 11 May 2009. Link here
  2. “Obama’s tax proposals won’t affect Indian firms: HCL chief”. 11May 2009. Economic Times of India. Accessed 11 May 2009. Link here
  3. “Obama’s tax will not impact BPOs: E&Y”. 11 May 2009. Economic Times of India. Accessed 11 May 2009. Link here

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