US FIRMS LOBBYING AGAINST ‘BANGALORE BUFFALO’ REMARK

Washington
Financial Chronicle The Economic Times The Indian Express

A month after US president Barack Obama came out with ‘Say no to Bangalore and yes to Buffalo’ rhetoric, American companies have launched a campaign against the new law that ends tax incentives to those firms which create jobs overseas.

The Technology CEO Council, a Washington-based advocacy group of US American tech-companies, on Tuesday, released a report which revealed that the policy to end “tax breaks” announced by Obama would result in a job loss of as many as 2.2 million Americans. The report commissioned by the Council has been authored by Robert J Shapiro, a former Clinton administration economic official, and Aparna Mathur, a research fellow at the American Enterprise Institute.

Besides affecting jobs, investments in the US in plant, equipment and property could fall by as much as $84.2 billion. Repealing or sharply limiting deferral would not generate large tax revenues, since substantial job losses, wage cuts and lower investments would reduce tax revenues.

On May 5, Obama had announced end to years of tax incentives to those companies which create jobs overseas in places like Bangalore. Instead the incentives would now go to those creating jobs inside the US, in places like Buffalo city.

“We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits,” Obama said.

“We will use the savings to give tax cuts to companies that are investing in research and development here at home so that we can jumpstart job creation, foster innovation, and enhance America’s competitiveness,” he said.

The Congress is now considering legislation that would sharply limit the “deferral” rules that protect US businesses from bearing much higher tax burdens on their earnings abroad than their foreign competitors in the same markets.

“The proposal to restrict ‘deferral’ would end up reducing US jobs and investment and could impair our economic recovery,” said Shapiro.