Ousting and Obstructing Outsourcing

 It is not new when the United States of America has come out with protectionist policy by undermining its own policy of Laissez Faire to get rid of the period of recession. The same thing was done by Roosevelt by adopting the policy of new deal to curb the impact of the great depression of 1929. This time Obama has started up his campaign against outsourcing by asserting that his administration will offer tax benefits only to firms that create jobs in the country. “One of the keys to job creation is to encourage companies to invest more in the United States. But for years, our tax code has actually given billions of dollars in tax breaks that

encourage companies to create jobs and profits in other countries,” Obama said. Obama further said “If you are a multinational and you are investing in India, and your workforce is in India, and your plants and equipment are in India, but your headquarters are here, you are taking deductions on all the expenses in India, but you are keeping your profits outside the United States, that just doesn’t seem entirely fair”. “Instead of tax loopholes that incentivise investment in overseas jobs,” Obama said in a speech in Ohio, “I’m proposing a more generous, permanent

extension of the tax credit that goes to companies for all the research and innovation they do right here in Ohio, right here in the United States of America.” In other words, new economic plan of US is primarily focused on making the middle class more secure and the country more competitive so that the jobs and industries of the future were not outsourced to China and India.

It is important to note that the payments by US companies for services outsourced to India or other countries are treated as normal expenditure and deducted from the company’s revenue at present. In this case the US companies are not required  to pay tax on that amount. If a company is having expense on a process near 70-80 $ it can be done in just 10-15$ when outsourced. Also the on outsourcing money company doesn’t required to pay tax. But now onwards they will be paying Tax on the outsourcing money. This is bound to affect the outsourcing market in India.