Obama wants US firms to stop outsourcing

Posted at 01/25/12 11:18 AM

MANILA, Philippines - US President Barack Obama proposed several tax measures aimed at encouraging American companies to bring jobs back home, a move that is expected to have an adverse impact on the Philippines' growing outsourcing industry.

In his annual State of the Union speech on Tuesday evening (Wednesday morning, Manila time), Obama laid out a vision for strengthening the US economy in an election-year by focusing on tax inequality and making the case for his economic leadership.

"Tonight, my message to business leaders is simple: Ask yourselves what you can do to bring jobs back to your country, and your country will do everything we can to help you succeed," he said.

"It's time to stop rewarding businesses that ship jobs overseas, and start rewarding companies that create jobs right here in America," he added.

Obama's proposed tax measures are seen as affecting the Philippine outsourcing industry,  the second largest in the world, which is heavily reliant on US-based companies.

While the US economy is now recovering, Obama blamed outsourcing for weakening it in the first place.  "No, we will not go back to an economy weakened by outsourcing, bad debt, and phony financial profits," he said.
Obama proposed changing the US tax code that currently gives tax breaks to companies that outsource jobs overseas.

"If you're a business that wants to outsource jobs, you shouldn't get a tax deduction for doing it. That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home," he said.

The US President said no American company should be allowed to avoid paying taxes by moving jobs and profits overseas.

"From now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay here and hire here," Obama said.

He also proposed giving tax breaks for American manufacturers, especially high-tech firms, that have operations in the US.

"If you're an American manufacturer, you should get a bigger tax cut. If you're a high-tech manufacturer, we should double the tax deduction you get for making products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers," he said.

Obama told Congress to approve these tax reforms and he will sign it "right away."

Many American companies have been outsourcing their call center services to the Philippines and India in recent years, since wages here are much lower than in the US. 

Some Americans blame outsourcing for the lack of job opportunities in the US, which continues to grapple with high unemployment.

The outsourcing industry is one of the bright spots for the Philippine economy. The outsourcing workforce grew about 10% in 2011 to 600,000, according to the Business Processing Association of the Philippines.

Outsourcing was also expected to generate revenues of $11 billion in 2011, up from $8.9 billion in 2010. It is seen to continue growing by at least 15% annually to hit $20 billion by 2016. - With Reuters