India Outsourcers Find Back Door in Canada 717
securitas writes "Metro International newspapers Toronto edition reports that more Indian companies are opening back doors into the United States by setting up shop in Canada. The issue of outsourcing, offshoring and nearshoring has become a hot issue, with the 2004 presidential election less than a week away. Candidate John Kerry has said he will close the tax loophole that makes it advantageous to outsource call centers."
Re:Near-shore is still off-shore (Score:1, Informative)
Re:Kerry in the senate... (Score:5, Informative)
Re:Close the tax loophole? (Score:3, Informative)
A WSJ journal article about this is posted here [interesting-people.org].
Re:Close the tax loophole? (Score:3, Informative)
decent article [theroyalgazette.com] on the subject.
It's not about outsourcing jobs so much as tax sheltering.
Re:Close the tax loophole? (Score:5, Informative)
* Companies do not have to pay US taxes on foriegn operations, until (unless) they bring it back to the US.
* If you pay taxes in another country and the US you can get deductions on your US taxes to account for this double taxation.
These two individually are not that bad, but thanks to the complexity of the tax code and fancy book-work a company can take advantage of both simultaneously. Ie they pay taxes only in the foreign country on their foreign operations, but at the same time, they get deductions in their US taxes, even though there is no double taxation. So essentially the US tax payer is paying part of their foreign taxes for them. This is what Kerry means when he says he want to close loop holes that force you to subsidize the outsourcing that is taking your job.
He plans to simplify the tax code, which as you said would bring in some revenue, and use that to decrease the overall corporate tax rate. It would also illiminate the relative penalty on bringing money back into the country, verses keeping it (and thus investing it) abroad. I can't find the document I read that explained this plan well - both the bullet point, and detail plans currently on the John Kerry site are fairly vague.
Re:Kerry in the senate... (Score:5, Informative)
At least try to find out if your claim is true before you try to reason based on it.
Re:this doesn't worry me, for some reason. (Score:3, Informative)
Re:Tech Support (Score:5, Informative)
I guess thats one reason, but let me maybe present another one. The company I work for recently did some outsourcing to India, even though we mostly went through Chicago when the RFP negotiations were going on when it came to the nitty gritty (i.e. the "real" work) communication was a huuuuge problem. Even after we worked that out the quality of the code we got back was, let us say lacking (this might have just been this one company, but I'm just saying...). Anyway, by the time the project was done it cost us more and took us longer than if we had just hired local contractors to do it. Edmonton is kind of a weird place, there are at least four post-secondary institutions pumping out IT grads three times a year, putting it bluntly we have a lot of skilled IT people flipping burgers around town. Getting those people who are still keen on the IT industry (but don't want to move away) into low paying but IT-related jobs isn't exactly hard to do.
Edmonton has always been an IT hub because of the Provincial Government (and the IT jobs it attracts), but in the last decade big IT firms have moved in and paled that aspect of Edmonton's IT community, firms like IBM, Microsoft, Fujitsu, BioWare, Intuit (etc, etc...).
P.S. It's good to see NAFTA finally doing what it was designed to do, form an even stronger economic partnership between the Americas.
P.P.S. If these Indian companies have indeed found a back door to profit in the good ole USA, you can be sure that the Canadian Revenue Agency will be sucking the life-blood from them if they are profitable. If there's one thing our Government knows how to do, it's tax the bejesus out of any pocketbook...
Re:what the article means (after you read it) (Score:3, Informative)
This is how Canada is a backdoor to the US:
You'd think that because Canadians are cheaper (slightly) that they are using Canadians to do Americans jobs.
Having lived there, I can say that nope, this isn't how it works at all, its worse than that!
Here is what they are doing: (basically, they are moving the Indians to Canada, to outsource them on US projects, because it is easier to get an Indian to Canada than it is to the US. So Canadians aren't even getting the jobs either, because even Canadians are too expensive!)
Canada has a very lax foreigner friendly and immigration policy. Especially if companies go waving around money about 'investing in Canada', the Canadian govt. will buy into it, because they (think) that this will create Canadian jobs rather than destroy them.
Satyam opens his company (I wonder how many of his 120 employees in company in Canada are not Indian). Then bring in Indians/foreigners to do the work less than Canadians will.. (but the office wouldn't have been opened anyways if you couldnt do this, so the Cdn govt doesnt mind that much really).
Then outsource the Indians in Canada, to US projects. Voila! Timezone and connectivity problems all go away because the cheap Indians are now in Canada and not India!
Then it gets even better! Unlike the USA, Canada has a very quick and easy naturalization process (takes only a few years), and then the Indians become 'Canadian' and get Canadian passports.
Then, because of the NAFTA agreement, those Indians can come to America, and take Americans jobs as that is now a T1 Free trade visa, and not an H1B. T1s have no limit, anyone who wants one who is Canadian with a college education in IT can get one and move to the US.
T1s hadn't been a problem since Canadian and American standard of living were almost the same anyways, but with this scam, the whole safeguard goes out the window.
So no one in North America really benefits from this, not the Americans, nor Canadian IT people either..its a purely Indian play.
Its a great plan really, surprised they didn't think of it earlier. Hard to fix it though, if Canada stops the practice, then they can just use Mexico the same way I suppose.
Re:why do we care what kerry said? (Score:3, Informative)
If you've been here long enough and have read enough comments and seen enough moderations, I think that you can draw conclusions. I would say that about 50% of Slashdotters lean leftward, 25% lean rightward, and 25% are in the middle. I'm technically in the middle but tend to lean rightward on the issues that are debated the most often and the most furiously.
Because there is no wrong, there is no right
And I sleep very well at night
No shame, no solution, no remorse, no retribution
Just people selling t-shirts
Just opportunity to participate in the pathetic little circus
and winning, winning, winning -- Don Henley, "The Garden of Allah"
Re:splendid (Score:1, Informative)
What happens is not double taxation. The US treats all worldwide income for a US company and individuals as if it were derived solely in the US. As with individuals, if the company pays taxes to a foreign govt for income earned in that country, the company ends up paying the US treasury the *difference* between the two taxes. A US company would end up with a rebate if the tax in the foreign country is greater than the tax the company would pay in the US.
The reason this breaks down is that large companies, such as IBM, Ford, Sony, BP and others, tend to be multinationals where each individual subsiduary is a native company. This allows the multinational to avoid all kinds of import duties and other excise taxes, take advantage of local tax breaks, while at the same time sheltering substantial parts of it's overall income, without disclosing any of it to the IRS. The company as a whole makes more money through non-disclosure than it would from tax rebates from the US treasury.
The reason certain companies have moved offshore, mainly to the Caribbean, is that these islands tend to have very low corporate taxes, and more importantly, extremely friendly corporate disclosure rules, allowing more tax avoidance/evasion.
Given that Sarbanes-Oxley was introduced to cut down on the more blatant forms of corporate malfeasance, I would be extremely wary of investing in a company that offshored, and hence did not have to comply with the reporting rules of S-Oxley.
Re:Kerry in the senate... (Score:5, Informative)
That's because you don't understand the ideology. You have simply reduced it to the simplest form possible presumably because you are not capable of understanding more complex thought patterns.
"Because you are born in America, you are worthy of help, but if you are born in India, you are not?"
Once again your inability to think beyond black and white has painted yourself into a corner.
I am not really going to go into it but here are the salient points.
1) We should help people all over the world if they need it to the best of our ability.
2) It's impossible to help everybody in the world because there is so much poverty and we really don't have enough money or willpower. Even if we really wanted to give a 100% effort to help the destitute of the world we would be fought tooth and nail by the republicans.
3) Charity begins at home. We really ought to tace care of our own problems first. We should devote MOST of our resources to making sure our own citizens are taken care of first.
You see, it's not that hard. Just compassion mixed with a little bit of realism. We still favor giving money to poor countries and helping them as much as we can but not at the expense of denying our own citizens.
BTW I noticed that you said "A tenet of the democrats is to help the disadvantaged.". Doesn't it bother you that republicans don't even have that tenant. That they don't believe in helping the disadvantaged?
ORIGINAL POST: Important details, Satyam Chairman (Score:5, Informative)
I'd like to point out that the story as posted edited out the attribution.
Editors: Please don't remove quotation marks where they are necessary because that effectively results in plagiarism. The words in quotes are not mine. They belong to the reporter.
Also, the reference to the interview with the Chairman of Satyam - an Indian outsourcer that has set up shop in Toronto - was removed. Knowing that Slashdotters often don't read the source articles, I included that detail as an incentive for people to read what the leader of a large outsourcing company has to say about this politicized business practice.
Original post follows:
Re:Close the tax loophole? (Score:3, Informative)
Yes they are. Like I said, neither of them are really bad by themselves. If a company only paid the foreign tax that would be fair. If they paid foreign taxes + US taxes - a deduction to offset the double payment, that is fair. But when a company pays only the foreign tax - a US deduction to offset double payment, when there isn't double payment, then that is a unfair tax loophole. It means these outsourced companies have advantages over both domestic and foreign companies who both have to full taxes for the country that they are in.
I absolutely agree that we shouldn't double tax our companies. So we should get rid of one of these two discounts (and simplify that portion of the code to make in less gamable). IIRC, the plan Kerry offered was to get rid of tax deferments, and make every US company pay the full US taxes minus the foreign taxes. Then outsourced companies would pay the exact same total taxes as US domestic ones. Outsourced US companies would have no more of a tax disadvantage than domestic US companies, when competing with foreign companies. It has the added advantage that there would be no tax penelties for investing money earned abroad back home. Not the best solution (IMHO, we should get rid of corporate tax altogether), but much better than the current situation.
Besides, the thing Kerry ignores is that taxes are not the reason for offshoring.
Well, he doesn't really ignore it. He has said repeatedly that his policies will not stop offshoring - just end some government interferences that encourage it. You are right that less expensive labor is the primary reason that work has been moving out of the country. But I don't know that causing some companies to leave by requiring better treatment than they are willing to give is any better or worse than convincing them to stay by giving into all their demands and joining into a race to the bottom. More importantly, I don't know that we will have much of a choice in the long run. I just hope that China's and India's internal markets grow quickly and evenly.
Yes and no.. (Score:5, Informative)
Re:what the article means (after you read it) (Score:3, Informative)
What are you smoking? Yes, Canada is friendlier and the way to get a Work Permit is a lot easier than doing this in the US, but "easier" doesn't mean they just roll over.
I am currently sitting here for almost 2 months waiting for my new Work Permit and the last update I got was that HRDC (who has to approve the job) is still fiddeling around with the paperwork.
Mind you, I am going to move from Toronto to Edmonton, a place where "talent" if you want to call it that, is a bit more scarce, but the point is that it costs companies money and a lot of time to hire foreigners, and I am not even Indian, I have a German passport.
The company has to proof for ANY employee they are hiring that is not landed or a citizen of Canada that they couldn't find a person who was. This takes (depending on the market) 4 - 8 weeks and a LOT of paperwork (Who else did they try to hire, how did they advertise the job etc. etc.).
So even if they have "indian" guys sitting there, those are most likely already landed immigrants or Canadian Citizens, especially Toronto has a large Indian / South East Asian population.
Not likely, the company would have to proof that every person they bring over from India HAS to be brought into the country because they couldn't find anyone local, and believe me HRDC in Toronto is nasty to deal with, I know, I did a couple of times.
What is more likely to happen is that they have some people here in Toronto who then delegate the work to the Indian Headoffice but that in and on itself isn't that bad in Canada, because the Canadian Subsidiary gets paid on the contract and pays it's taxes still in Canada.
Also, people on a Work Permit have to be paid "comparable wages", so you cannot simply hire an indian for 10% of what the Canadian would make AND unlike the US H1B the Work Permit belongs to ME not the Company, if I want to leave I can, I just have to find another company who wants to do the HRDC portion again, and the old company would never even know.
It takes around 2 1/2 years to get your landed papers, you have to apply in your country of Origin or (if you are already in Canada on a temporary permit) in Buffalo, after you have this paper in your hand it takes another 3 years before you can apply for Citizenship.
The Landed Status, btw, will cost you ~5K CAN, that includes language proficency tests, medical exams and a host of other things. 5K is a lot of dough for a dude in India.
The T1 ONLY applies to Canadian Citizens, by the time the guy has this he has already been in Canada for at least 5 years, chances are pretty good that by then he has settled and the last thing on his mind is moving to the states.
Geez, tone down your fear a bit, will ya?
Re:Roman Empire (Score:3, Informative)
1) Its taxation system was designed to destroy its tax base,
2) There was this nasty plague,
3) The Empire had no system for picking Emperors beyond "the guy who wins the Civil War after the last Emperor died". Note though, that they had a working system for a while, and abandoned it when one of the Emperors decided to stop using it, and let his son inherit.
4) There were these barbarians living beyond the borders who wanted the good stuff like the Romans had.
Add all those things together, and the WESTERN Empire fell. The Eastern Empire lasted another thousand years, finally falling to this Turkish army that wanted the good stuff like the Romans had.
Re:So now we can really... (Score:3, Informative)
Please learn something about business before shooting your mouth off.
We can argue whether greed is wrong or not, but let's not quibble over a moral issue. Contrary to popular belief CEOs do not make "billions". Many of them make a couple million dollars a year, but a lot of that is in stock options. Now as for making more money by outsourcing, let me offer you this scenario.
Two companies A and B exist right beside each other in the US. They both make the same product and charge the same amount for it. Their costs to produce the product are the same.
Now let's suppose that A outsources its tech support to India. Before hand they had 12 technicians paying them $12 an hour. For the cost of one of those technicians they can hire all 12 India technicians and pay the phone bill. Now their costs have dropped $132 an hour not counting what they save on the telephone bill. You can drop the cost of your product and gain market share from B without loosing profit margins.
Now everyone might be pissed that A is outsourcing, but they're still going to buy from A over B because A's widgits are cheaper. The fact that they outsource doesn't matter. Loyalty in America these days extends only to the pocket book.
Re:Unpopular consideration... (Score:2, Informative)
What does it cost per month for rent? What is the monthly food budget for a family of 5?
Obviously, in the US rent (or mortgage) will vary depending on where a person lives, but for most middle class people, it'll be between $500 to $1500 per month. Food will be at least $500/month for a family. Tack on at least another $500 in other expenses such as utilities and we're at a $1500 to $2500 per month, or $18K to $30K per year without even considering clothing or medical costs. At a minimum, tack on another $5K/yr. We're now at $23K/yr to $35K/yr. The poverty line for a family of 5 in the US is $22K/yr, so I'm not talking about an extremely rich lifestyle here. We haven't even touched discretionary income or the cost of a car.
This is why many americans are so upset. Its not that they're tired of being extremely rich, its that there's a lot of people who are already having a hard time getting by and losing even $10K per year makes a big difference. While most americans might be richer than most people in India, most are no where as rich as they appear on TV.
Re:Well at least you will be able to understand th (Score:1, Informative)
from Proto-Indo-European (Sanskrit) via
High German and Latin.
Re:Near-shore is still off-shore (Score:2, Informative)
In some cases, companies in the U.S. own and operate offshore facilities, where they pay the foreign countries associated wage taxes. But in many cases, the offshore facility is actually owned by a foreign corporation as well, meaning that the entire transaction is merely corp-to-corp service. There is no tax on corp-to-corp services, so there is no tax on the U.S. company whatsoever (except we assume the foreign corp pays their proper payroll taxes and that is built into the pricing structure.) Not that I am in favor of a tax on services. Since my wife owns a consulting company, that would not be beneficial for me specifically, but it would certainly even the playing field.
Comment removed (Score:3, Informative)