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Software companies cry foul as US Senate passes 9/11 taxes bill

Saturday, 25 December 2010 - 2:38am IST | Place: Bangalore | Agency: dna

Taxes being slapped repeatedly on the sector, which earns more than 50% of its revenues from the American market, are making it uncomfortable and insecure.

The US government’s latest tax salvo through the James Zadroga 9/11 Health and Compensation Act, passed by the Senate on Wednesday, has got the domestic information technology (IT) sector grinding its teeth in frustration and anger.

Taxes being slapped repeatedly on the sector, which earns more than 50% of its revenues from the American market, are making it uncomfortable and insecure.

Industry lobby body Nasscom president Som Mittal views the US government’s move as “unfair and anti-trade in spirit.”

“We are aghast that this (imposition of taxes on foreign companies) is being used again and again. And this is happening when we are opening up to America and are creating jobs for them (in US and in India). This is not fair,” he said.

Hikes in visa fees and taxes have become tools in the hands of US administration to extract funds from “foreigners.”

“Every time and anything that has to be funded, they will find foreigners to pay for it,” an angry Mittal said.

Another industry insider, who did not want to be named, said the US was blatantly following a discriminatory and protectionist policy by doling out tax concessions to the American companies and burdening foreign firms with back-breaking levies.

T V Mohandas, HR head and director of Infosys, also feels the US government’s policy of infliction of tax burden on the Indian tech companies was “becoming unreasonable.”

“It’s seems to be becoming a political game for every senator. This is not done,” Pai said.

Another IT honcho suggested the Indian government should mount an aggressive global protest against the US move and retaliate by introducing similar prohibitive taxes on US firms.

On Wednesday, the US government increased tax burden on the hapless Indian tech firms by passing the James Zadroga 9/11 Health and Compensation Act in the Senate.

The Bill will raise $4.3 billion to provide for health claims of those affected by the 9/11 terror attack in 2001.

A large part of the Bill will be funded by a 2% fee on goods and services purchased from foreign companies in countries that are not signatories to the World Trade Organisation’s (WTO) Government Procurement Agre-ement (GPA). 

This will affect India and other countries that are not part of the WTO pact. The Bill, which has yet to become an Act as President Barack Obama has not signed it, will also be financed by extension of hikes on H1 and L1 visa fees by one more year — from four years to five years.

Earlier this year, the senate passed Emergency Border Security Bill, which will to raise $600 million from increased fees on H1 and L1 visas that are extensively used by Indian IT firms to deploy India techies for onsite work.

What is making Nasscom’s Mittal furious is that each time a Bill is passed there is a mention that it will not affect American companies like Microsoft, IBM and others.

“It is a deliberate move to hurt the India companies. The US senator did say it will not affect US companies but Indian companies like Infosys, Wipro, TCS and others,” said the Nasscom head.

Mittal also feels US has backed out on President Obama’s promise, made during his visit to India, to push free trade between India and US.

He is also disappointed with the progress on the socialisation treaty, which would allow Indian employees on H1 and L1 visas to enjoy social security benefits.

“They (US government) have been dragging their feet on it. We (Indian tech companies) spend $1billion on social security fee every year but IT employees cannot avail its benefit because, under the current rule, one is eligible for social security only after 10 years of stay in the US while most techies return in less than six years.” he said.

India has socialisation treaty with France, Germany, Brussels and others.

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