Sunday, July 26, 2009
YOU TOUCH US, WE HIT YOU
PICTURE THIS: IF AMERICANS STOP OUTSOURCING WE WILL BUY THEIR COMPANIES.
Much is being talked about the exemption of tax breaks for American companies who outsource jobs to places like India, by president Obama. It is also not very surprising that the media is playing its part by instilling fear into the minds of the employed. What we fail to understand is that these tax changes will only FACILITATE THE TAKEOVER OF U.S FIRMS BY INDIAN ONES. By now, I am sure you must be thinking I am out of my mind. Hold on corny. I intend to dispel that notion in the following paragraphs.
The U.S imposes taxes on the GLOBAL EARNINGS of its companies and not just its indigenous earnings. Various companies protested that these taxes made them uncompetitive in low-tax countries.
For ex. American company, Coco cola will be loosing out revenue in the form of taxes paid to the U.S government as compared to Parle’s THUMBS UP who are paying lesser taxes to the Indian government. This increases the advantage of THUMBS UP in terms of revenue earned as compared to Coco Cola.
(Coco cola has purchased THUMBS UP. Simple policy… You can’t beat ‘em, BUY ‘EM!)
Therefore, to reduce this disadvantage, the American government made profits earned abroad tax-free provided it is brought back to American soil. This eventually helped companies to establish large operations and eventually shift jobs to countries like India and china where the labor is cheap.
A number of U.S companies saw this as a lip smacking opportunity and began to outsource their jobs. This reduced the cost of production and increased the revenues for these companies.
What the Americans did not realize is that by outsourcing the jobs the Indians began to adapt and upgrade. The Indians saw this as a rare opportunity and began upgrading their skills and understand the importance of computers and began to carry their work efficiently and quickly. Soon American companies began outsourcing their R&D and other skilled work. What was happening is, Indians were developing their skills and knowledge and the Americans were paying the Indians to do so!
Now, NASSCOM says 400 out of the fortune 500 companies now have operations in India. India has become a hub for brain-intensive manufacturing. It is to such extent that the financial markets penalize U.S companies that do not outsource as their competitiveness is eroding. Accenture, a big consultancy company has more employees in India than in the U.S. IBM has 70,000 employees in India and it’s growing fast.
IN SHORT, AMERICA NEEDS INDIA and America will outsource.
So, even if Obama’s legislation ends the tax breaks, it will still be favorable for the companies to outsource in India. Shifting jobs back to the U.S will just mean suicide for the companies due to the high costs especially in these times of recession.
Also, if the tax breaks are denied, it only improves the competitiveness of the rival Indian companies.
The ill effects of the recession have not affected companies like TCS or WIPRO as compared to ACCENTURE or an IBM. Therefore, once the Indian companies establish their supremacy and thrive in the market it will only weaken the U.S companies and facilitate their take over by the Indian companies.
To sum it up, the message is simple: You have exploited us enough and more to your advantage. Now if you cut a job in Bangalore, we will create 10 in Buffalo. So, do the talking and make the American people happy but don’t turn it into actions.