Amid indications that outsourcing could become a hot issue in the November elections, US President Barack Obama has made his stand on the issue clear, saying tax breaks should go to companies that create jobs in the US and not overseas.
Obama comments have come after the Ohio state governor passed an executive order to ban outsourcing, a development that has raised concerns in India that is often described as the world’s back office.
Significantly, Obama’s policy speech on economy came in Ohio itself, where he made clear his determination to end tax loopholes that provided incentives for investment in overseas jobs, saying he would provide a generous tax credit to companies that created more jobs in the US.
“One of the keys to job creation is to encourage companies to invest more in the United States. But, for years, our tax code has actually given billions of dollars in tax breaks, encouraging companies to create jobs and profits in other countries,” Obama said in Cleveland.
He said he was determined to change that. “I want to change that. Instead of tax loopholes that incentivise investment in overseas jobs, I’m proposing a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in America,” he said, with Ohio Governor Ted Strickland standing by his side.
With elections due in November for 37 of the 100 seats in the US Senate, and the opinion polls painting a grim picture for the Democrats, Obama sought to project the tax issue as a key policy difference between his party and the Republicans.
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“I think if we’re going to give tax breaks to companies, they should go to companies that create jobs in America, not those that create jobs overseas. That’s one difference between the Republican vision and the Democratic vision. And, that’s what this election is all about,” Obama said.
Running behind in opinion polls, Democrat Strickland, who till now was going out of his way to woo Indian companies, last week passed an executive order that banned outsourcing, arguing this undermined economic development and had unacceptable business consequences.
“Outsourcing jobs does not reflect Ohio values,” Strickland said in a statement after he signed the executive order.
Reacting to the order, the Indian IT sector, which got 60 per cent of its export revenue from the US, termed the move discriminatory and said it amounted to a trade barrier.