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Offshoring's New Threat: The Schumer Bill

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Friday, June 04, 2010 |

For all the cost savings that it still promises, the offshore outsourcing industry has braved much opposition this year - beginning with the cease in tax breaks to offshoring companies promised by President Obama in his State of the Union Address. The threat has recently been embodied in the form of a new legislative attack proposed by Sen. Charles Schumer on the offshore call center industry.

Sen. Charles Schumer proposes new legislative attack on the offshore call center industry

Schumer announced that the plans are to introduce legislation that will require firms to publicly disclose available reports of their offshore call center operations. In addition to that, said firms will be required to pay a tax on every call sent offshore. A closer look reveals that this new legislation has three main clauses:

Firstly, a 25-cent excise tax will be imposed on any customer service call that orignates in the US and is transferred to a customer service personnel in a foreign location (commonly known as contact center outsourcing).

Secondly, companies will have to inform their customers of where their call is answered.

Finally, the bill requires companies to publicly disclose quarterly and annually the amount of customer calls received and how many of which were sent offshore - submitted to the Securities and Exchange Commission.

Schumer said that he plans to introduce legislation requiring that firms disclose in publicly available reports their offshore call center practices, and to pay a tax on every call sent offshore.

“If we want to put a stop to the outsourcing of American jobs, then we need to provide incentives for American companies to keep American jobs here,” stated Schumer. “This bill will not only serve to maintain call center jobs currently in the United States, but also provide a reason for companies that have already outsourced jobs to bring them back.”

It is certain that large outsourcing organizations that utilize offshore call centers will oppose the bill – as was the case with a bill that threatened to keep multinationals from keeping profits offshore in low-tax jurisdictions and delay paying taxes on overseas earnings. It was clear then that elimination of tax breaks for outsourcing companies was not enough to halt the offshore outsourcing freight train. Should Schumer's bill come into law, it may just mark a significant step in the direction of ceasing the transfer of jobs to offshore locations – at least in the contact center sector. Where other bills have failed in the past, this one may just succeed and speed up the growth of a recovering US economy. 

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