Globalisation of businesses on the one hand, and the extensive spread of the Internet on the other, facilitated the phenomenon of global manpower outsourcing. The growth of usage of computers in all walks of life created enormous demand for English speaking and trained manpower for working as programmers. The economic rationale for using foreign nationals in low-end application programmes was the significantly lower wage costs and sheer manpower resource availability. This trend has rapidly spread to many other areas such as call centre operations, legal, accounting and auditing, engineering, manufacturing processes etc. generally termed as business process outsourcing (BPO), and gave rise to two types of employment of foreign nationals - onshore or off-shore services and in each case there have been corresponding loss of job opportunities for locals. In the onshore format, the foreign national is
In the US, which is the major promoter of outsourcing as a model for competitive global business operations, there is a growing public resentment on the jobs lost to foreign nationals. The volume of jobs lost can be gauged by the fact that in each of the cities like New Delhi, Mumbai, Hyderabad and Bangalore in India, there are hundreds of companies employing thousands of men and women, providing back office services on 24x7 basis, to the US and European companies (BPO India, 2009). In the past most of these jobs in areas such as customer services, credit card operations, medical transcription, data entry, telemarketing etc. were being performed locally in the US itself by US nationals. The high hourly wage costs and the opening up of the world markets for services led to the outsourcing trends. In addition, the major Indian IT firms place thousands of their employees at the clients' premises for operations such as programming, installation, maintenance and training. Further, major US firms like Microsoft, IBM, Dell, Accenture, and Deloitte have established subsidiary companies in India i.e., they have effectively shipped jobs abroad.
While economising on manpower costs is one reason for outsourcing, avoiding payment of taxes in the US is another aspect. Some business houses establish overseas operations in tax haven countries because the corporate income tax in the US is relatively higher, thus encouraging firms to establish operations abroad where either there is no tax or the tax rates are much lesser. Under the double taxation agreements, which the US has with a host of countries, if US firms pay taxes abroad on the income generated from
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their foreign operations, then there is no need to pay taxes again on such income in the US, meaning consolidation of global income for tax purposes is not required. There is a growing criticism of such tax breaks for firms, which ship jobs abroad.
The current economic down turn has only accentuated the demands for discouraging firms from outsourcing. During the 2004 presidential elections, Mr. John Kerry