IT industry downplays Obama's outsourcing move

The $47-billion Indian software export industry on Tuesday sought to put up a brave face on President Barack Obama's proposal to disallow tax deduction for company's outsourcing their business, saying the move will hit the US companies with "marginal" impact on India.

IT body NASSCOM said it is still reviewing the tax proposals announced by Obama. However, "prima facie, the proposals appeared to be aimed at addressing the tax rate differentials that exist across the world and if implemented, this would impact American headquartered companies with overseas operations," it said.

It said global companies that earn profits in India are subject to a tax rate of 33.9 per cent (including surcharge and cess) and "the impact of the proposed reforms on them would be marginal."

President Obama had yesterday proposed an end to tax deductions on those US companies which create jobs overseas in places like Bangalore.

Instead, the incentives would now go to those creating jobs inside the US, in places like the Buffalo city—bordering Canada.

"We will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jump-start job creation, foster innovation, and enhance America's competitiveness," Obama said.