Outsourcing : The Stay-Out Gesture

Tax breaks on one side, outsourcing benefits on the other. Right now, the scales are titled towards outsourcing. US President Barack Obama’s recent statement about ending tax breaks for corporations that ship jobs overseas has created a furore in outsourcing countries. In this frenzied debate being played out in the media, the irony is that no one quite knows for sure what Obama meant when he uttered those words or what he really plans to do. Was he referring to tax breaks on repatriating offshore profits back to the US or was he referring to tax breaks on work off-shored to other countries? The former is relatively minor issue, while the latter can have much bigger ramifications.

Tax breaks on offshore earnings have been a source for the Republicans and Democrats ever since the previous Bush administration, a few years ago, announced a one-time tax break for corporations to repatriate their overseas earnings. The idea was to incentivize companies to bring their foreign earnings home and re-invest it instead of parking it in a tax haven outside the US.

While the Republicans want this tax break extended no to stimulate investments in the country, the Democrats are against such a move. Could Obama have bee referring to this debate? We’ll know for sure only once the rhetoric gets translated into action.

Source: Outlook Business