Friday, May 08, 2009

Why Obama chose to target Bangalore?

The entire BPO industry in India went berserk after the Harvard Law Graduate President Barrack Obama said the following, "It’s a tax code of corporate loopholes that makes it perfectly legal for companies to avoid paying their fair share. It’s a tax code that makes it all too easy for a number — a small number of individuals and companies to abuse overseas tax havens to avoid paying any taxes at all. And it’s a tax code that says you should pay lower taxes if you create a job in Bangalore, than if you create one in Buffalo, New York.”

Why Obama chose to name Bangalore instead of any other city in the world remains an open mystery to the world, particularly Indians, and more particularly namma Bangaloreans. It seems like not only the other cities in India, but even the most powerful county in the world is fearful of namma Bangalure, the Silicon Valley of India, or should we say Silicon Valley of world. One thing is very clear, Bangalore is now much ahead in terms of IT business than any other cities in the world and so we Bangaloreans should feel proud about it.

But what worries everyone here in the IT capital of India is the after-effects of Obama's now famous Bangalore speech. Rumors have started spreading like wildfire that the BPO industry in Bangalore may see huge repercussions in the coming 6 months. Well, the fears are genuine but we should not be too much worried about this. This means like Obama wants some drastic changes made in the income tax laws of his own country, so that more revenues should come in US treasury. Now the accounts for about 60 percent ($30 billion) of the $50-billion IT export revenue from India. About 70 percent of the export revenue is generated by Indian firms and the remaining by multinational captives or third party vendors in the sub-continent. That means that if any loss of revenues will also be loss of revenue for US if they change the tax laws in their own country.

So, in other words, as long as Bangalore and the rest of India continues to work smartly, the US would always try to make reforms in their tax laws, so that a part of revenue generated in India will be paid back to US in terms of taxes, and thus we all Indians can says proudly that now we are helping US getting out of the great recession of all time.

© 2009 Ranjan Kumar

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