US Senate rejects bill to curb outsourcing

Wednesday, September 29, 2010

WASHINGTON - The US Senate has rejected a bill that sought to end outsourcing of work to countries like India and create jobs by denying tax cuts to companies that hire a non-citizen to replace a domestic worker.

With Republicans clearly opposed to the move, the bill - which was seen by India as another major protectionist measure by Washington against developing countries - was rejected 53-45, with two abstentions.

The bill primarily sought three actions:

* Deny employment tax exemptions for 24 months to companies that hire a non-citizen or a non-permanent resident to replace a domestic worker

* Deny any tax benefits for the cost of an American job that is shipped out or outsourced overseas

* Eliminate tax exemption on that part of an income of a foreign firm that arises out of property imported into the US, other than on farm goods not grown domestically.

A bill to amend the Internal Revenue Code of 1986 to create American jobs and to prevent the off-shoring of such jobs overseas, read the official measure proposed in the event of the passage of the bill, sponsored by Sen. Richard Durbin of Illinois.

TechAmerica, the association of some 11,000 information technology companies in the US, was opposed to the move and said rather than nurse the economy back, it would actually undermine the recovery.

This legislation is misnamed because it would eliminate American jobs not create them, said TechAmerica President Phil Bond. This bill would increase taxes only for US companies operating outside of the US, hindering their global competitiveness.

The rejection came barely a week after India’s Commerce Minister Anand Sharma, during a visit here, expressed New Delhi’s concern over that he called were restrictive and protectionist policies adopted by the US in the last few months.

“Protectionism kills growth and innovation. To ensure we continue our high growth trajectories, we have to be strong to resist domestic calls and pressures to increase barriers to trade,” Sharma told US Trade Representative Ron Kirk.

“I feel the US has seriously registered India’s view point as well concerns of the Indian IT industry. We do hope there will be timely and appropriate responses,” he told reporters after his meeting with Kirk.

India has been objecting to a series of protectionist measures announced by the US recently, and has said these steps were likely to negatively affect the business of Indian outsourcing companies.

Among the steps was an increase in the US visa fee, that is estimated to put an additional burden of $250 million annually on Indian IT firms. The US increased the fee by $2,000 for certain H-1B and $2,250 for L-1A and L-1B.

Another protectionist approach was by the US state of Ohio, which recently banned offshore outsourcing by government departments.

Filed under: Economy

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