“US President Barack Obama pledged to end tax breaks for corporations that send US jobs overseas.” (Source: Indian express)
According to Obama administration, there will be no tax benefits for US firms that outsource their jobs overseas. As a justification to the decision, it has been stated that it would restore a sense of fairness and balance to US tax code and will create/save millions of the jobs in the country.
Well, this decision of President Obama to clamp down on outsourcing is surely going to affect the Indian tech sector. But the other side of the reality is that US is also going to suffer with this move, as outsourcing has brought a lot of economical and logical changes to the country.
The global competitiveness of US firms has been enhanced with outsourcing which has resulted into a large number of jobs within US economy. This move might damage the global competitiveness of US economy. It is a challenge for US companies such as Microsoft, Hewlett-Packard, Motorola, Pepsico, IBM etc., which have outsourced jobs to foreign countries such as India and also to Indian IT and software companies that are proliferating in US. Businesses these days are more global than ever before, the denial of tax benefits can prove to be an obstacle in the path of progress towards globalization and modernization.
No doubt President Obama’s decision is aimed towards the revival of US economy, but in the current economic environment when the entire world is under pressures of global meltdown, it is vital for all countries to collaborate on technology and innovation. Such policies only obstruct the renaissance of world economy.
Considering the current business and economic scenario, the proposed move to discourage outsourcing seems to be more harmful for American companies.