Talent pool makes Indian IT impervious to Obama's tax threats

By SiliconIndia   |   Thursday, 27 November 2008, 10:29 Hrs   |    1 Comments
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Bangalore: Despite the slowdown, the Indian IT industry is impervious to any threat from the U.S. President-elect Barack Obama's proposal to repeal tax breaks for companies that outsource certain operations to offshore centers. "Obama's tax plans are unlikely to affect the outsourcing industry because of the scarcity of IT talent in the United States," says Suresh Senapaty, CEO, Wipro.

Infact, the companies think that the proposal is justified as the President-elect has to finance a trillion-dollar bailout. As per stated in Obama's website, those tax break will be repealed which reward corporations that retain their earnings overseas and will use those savings to lower corporate tax rates for companies that expand or start operations in the United States. The surging unemployment rate and the financial banks collapse makes it more eminent for Obama to attempt every possible way to keep jobs at home. So, even the analysts have given a positive nod to the measure adopted by the President-elect.

The analysts are of the view that the existing U.S. Internal Revenue Code can come handy for the Indian IT firms since, as per the code corporations are allowed to offset losses in overseas jurisdictions against profits made in the United States. "The tax plan proposed by Obama, who will be sworn in as president on January 20, seeks to revoke this benefit," said analysts Kishore Belai and Shashi Bhusan of Macquarie Research Equities. Hence, while Indian IT-services companies like Infosys, Wipro and Tata Consultancy Services will shed lower amounts as taxes, U.S. companies such as Cognizant and IBM will have to pay out more.

Moreover, Avinash Vashistha, CEO of Tholons points out that it would be easier for Obama to control jobs that are going offshore in the manufacturing sectors such as textiles and autos, but not in the IT sector. "He (Obama) cannot dictate what companies do or do not do," he said. But Zinnov management Consulting's Director of Advisory services Chaitanya Ramalingegowda wants IT to maintain a �wait and watch� attitude.

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