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Basics of outsourcing have not changed: Zinnov

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CIOL Bureau
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Chandarmouli, Director – Advisory Services, Zinnov, commenting on Obama's tax break statement said: The world today is a global village and any such protectionalist measures will not only restrict innovation but also hamper the progress of globalization. However, having said that we should not forget that it was the United States of America that truly taught everybody the real meaning of free trade. We definitely need to wait for more details to understand Obama's statement. His speech was an extension of what he had spoken earlier in his campaigns. The basics of outsourcing have not changed, and therefore it will not impact India adversely. If at all, we see this change to impact the MNC outsourcing companies (as they are liable for more tax in US) than India based outsourcers. Because, if they do away with tax breaks on repatriating the offshore profits alone in a case where profits are brought back to US, it might impact the large MNC outsourcers such as IBM, HP, and Accenture. However, we do not see a big impact on the Indian industry per se. But, if the tax breaks are extended to the work Offshored to any country outside US, then we are bound to see some definite impact on the offshoring industry. Therefore, for now, it’s just a wait and watch game, so that all of us really understand what it has in store.

US president, Barack Obama in his first address to the joint session of the US Congress said, “We will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.”.

He has also said that tax cuts for America’s wealthiest constituting 2 percent of USA's entire population will end.