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Outsource magazine: thought-leadership and outsourcing strategy | September 20, 2017

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Obama rattles outsourcing sabre

Outsource Magazine

Buffalo, not Bangalore? US President Barack Obama  appeared to target offshoring in his latest strategy to get the US economy back on track as he announced the end to years of tax incentives to the US companies, which create jobs overseas.  This will, he argues, save taxpayers $210 billion over the next decade.

“It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, than if you create one in Buffalo, New York,” he said.  “I want to see our companies remain the most competitive in the world, but the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens.”

“We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits. We will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jump start job creation, foster innovation, and enhance America’s competitiveness.”

Indian trade association Nasscom said the move is unlikely to have any serious impact on the Indian IT industry. President Som Mittal said: “The proposed changes will affect Shanghai more than Bangalore. I think it is not an issue of India but about US firms. I think even mention of Buffalo and Bangalore has been misinterpreted as he’s going to use money to do research so that more jobs created in US – that’s a good thing. Our industry is part of the solution that America needs and it is not an issue of a problem we are creating.”

Pramod Bhasin, Chairman, Nasscom, added that tax rates play a “very minor role in determining where companies locate their business”.

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