US considers new outsourcing tax, targeting Indian IT sector: report

New Delhi: Trump administration is looking forward to levy 25% in taxes on American firms having employees overseas.

The ‘The Halting International Relocation of Employment Act’ Bill that Republican senator Bernie Moreno introduced in the US senate on Saturday, if it becomes law, could turn outsourcing jobs expensive for American companies.

US trade advisor Peter Navarro last week called for imposing tariffs on remote workers in foreign countries, opening another front for punitive tariffs.

With Indian tech companies offering key services to US clients , which account for over 60% of India’s IT outsourcing revenues, the Bill could have crippling effect on the country’s IT sector.

Since the emergence of IT industry, India has been the top destination for the US companies to get outsourcing works done.

The reports about the Bill sent jitters across India’s IT sector with IT stocks taking a hit earlier this week as Nifty IT and BSE IT index falling by 1% at the end of Monday.

Meanwhile, Economic Times reported that the Bill could adversely impact global capability centres (GCCs), mostly American owned offshore tech facilities of multinational companies.

The Bill, however, does not directly target India, it is evidently focusing on 50–60% of Indian IT revenue coming from the US.

The major IT companies in India including TCS, Infosys, Wipro HCLTech and Tech Mahindra rely on US clients for more than half of their revenues.

However, in order for the Bill to become a law, it requires White House support, which it currently lacks, according to Economic Times.

Also, passing of any controversial bill requires what the report said bipartisan negotiation in Congress where Republicans have only a narrow majority.