Surveys Predict Massive Outflow Of US IT Jobs
When Hewlett-Packard told analysts last week that it planned to outsource major
parts of its software support functions to lower cost 'offshore' countries such
as India, China and Mexico, it became just the latest in a long line of US companies
to join the global IT outsourcing craze. And what is good for the countries
with large, well-educated low-cost populations such as India and China is good
also for the truly offshore jurisdictions that tend to be staging posts in the
outsourcing process. For India, it's usually Mauritius; and for China it's usually Hong Kong. These
are the places through which incoming investment is often chanelled, and where
IT operations often set up their regional holding companies, taking advantage
of favourable tax regimes for capital and in some cases for labour also. The
destination countries wink at or even actively encourage the offshore holding
company regimes, because it's a way of offering tax incentives without having
to defy the OECD or explain too much to local vested interests. India and Mauritius
are a perfect example. Ann Livermore, HP's services chief, said the company plans to relocate a major
portion of its IT services work to India: "We think customers are going
to put a lot of pricing pressure on the consulting and integration market. We
are going to aggressively move everything we can offshore." In fact., HP
already has several thousand employees in India. Other major US companies that
have trodden this path include EDS and IBM. The companies say they have to do
it, to compete with foreign-based, lower cost competition. A report from Forrester Research says that around 30,000 IT jobs have gone
overseas so far - and that the number will grow to not far short of half a million
in the next five years. While the lower cost is the main driver, says Forrester,
other factors encouraging the drift offshore are vastly improved and much cheaper
telecommunications links, together with the startling development in web-enabled
services, allowing a remote facility to work in with a head office team as if
it's in the next room. For US companies wanting an intermediate regional HQ or holding company, a
legion of low-tax offshore jurisdictions has grown up to offer advanced IT facilities,
including as well as Hong Kong and Mauritius, the Isle of Man, Bermuda, and
the Netherlands Antilles. In fact, nowadays almost every low-tax offshore island
holds itself out as the beating heart of the data revolution. Most of them are
doomed to beat on vainly: once a concentration of activity has developed in
a particular jurisdiction, it's hard for neighbouring ones to make out that
they're more attractive. A comprehensive report describing the stage of development of e-commerce in most major offshore jurisdictions, including the legislative regime, is available in the Tax News Reports Shop at http://www.tax-news.com/reportshop/
|
|
IMPORTANT NOTICE: TAX-NEWS.COM has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments. All materials on this site copyright TAX-NEWS.COM 1999 to 2007. Contact us for further information.