US President says 'yes' to Buffalo and 'no' to Bangalore
Agencies
Washington, May 6: Obama said he will end the tax incentives to those US companies which created jobs overseas in places like Bangalore. Instead, the incentives would now go to those creating jobs inside the US.
In a move that could well spell disaster for nearly 10 lakh Indian IT professioanls and a sizeable chunk of the country’s BPO, US President Barack Obama on Monday unveiled new proposals to end tax breaks for American companies that shipped jobs overseas, including India.
In meeting one of his major election promises, Obama said he will end the tax incentives to those US companies which created jobs overseas in places like Bangalore. Instead, the incentives would now go to those creating jobs inside the US. Keeping domestic politics in mind, Obama said: “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."
The new tax laws are expected to hit countries like India, China and Philippines, where US companies have been outsourcing their work. Nearly 60 per cent of Indian IT-Business Process Outsourcing industry caters to US companies, according to latest figures. India’s BPO industry employs over 17 lakh professionals.
Outlining his proposals to close corporate tax loopholes and crackdown on overseas tax havens, the US President said: “For years, we’ve talked about ending tax breaks for companies that ship jobs overseas and giving tax breaks to companies that create jobs here in America. That’s what our budget will finally do.”
“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,” he said.
Obama said his administration will use the savings to give tax cuts to companies that are investing in research and development in the country to jump start job creation, foster innovation, and enhance America’s competitiveness.
Corporate loopholes
Hitting hard at the current taxation system, to which he had been very critical since his election days and as a Senator, Obama said the current tax code was “full of corporate loopholes” which made it easier for American companies to flout the law.
“It’s a tax code full of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share. It’s a tax code that makes it all too easy for a number — a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all,” Obama said.
Reiterating his campaign rhetoric, the US President said: “The way we make our businesses competitive is not to reward American companies operating overseas with a roughly two per cent tax rate on foreign profits; a rate that costs taxpayers tens of billions of dollars a year.”
Obama said he wanted US companies to remain 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,” he said.