BANGALORE, India President Barack Obama's attempt to address overseas tax loopholes that the administration says are being exploited by U.S. companies offshoring work to countries like India could adversely affect their overseas operations, the Indian software industry warned.
Proppsed reforms could affect the offshoring operations of U.S.-based tech giants like IBM Corp., Microsoft Corp. and Intel Corp., who employ thousands of Indian workers. The U.S. is also India's biggest software export services destination, accounting for some 60 percent of its software exports.
India's IT services and business process outsourcing companies employ about 2.3 million workers directly and provide indirect employment to another 8 million, according to the National Association of Software and Service Companies (Nasscom).
Nasscom, the Indian lobbying group for software and call and data center companies here, predicted that President Obama's tax reforms will undergo a lengthy debate before any provisions are implemented.
"It is important to note that most large [North] American companies have more than 50 percent of their revenues coming from markets outside the U.S., and would be affected by the proposed tax reforms, if implemented," Nasscom warned. The operations of global companies earning profits in India, now subject to a tax rate of 40 percent, will be marginal if the proposal goes through, it added.
Companies here are taking a wait-and-see attitude toward the administration's proposals. Some, like the Karnataka state government's Department of Information Technology (which also oversees Bangalore's software industry) said the proposals' impact could be "severely negative."
K.C. Krishnadas is site editor of TechOnline India.