Are Obama’s offshore tax plans good for Indian suppliers and Mexico?
India is still the main offshore destination for those companies that want to deploy labour arbitrage to reduce their cost. This approach to reduce cost by replacing jobs in the U.S. and European countries with jobs in Asia and Africa is not something American and European politicians like to see (now even less then before). This political sentiment is demonstrated by among others president Obama who is thinking about ending tax breaks for companies that "ship jobs overseas. What the effect could be on offshore suppliers is however not clear yet. Most likely he wants to eliminate U.S. multinationals' ability to deduct business expenses associated with overseas operations while deferring tax payments on profits earned abroad (companies don't pay taxes to the U.S. government on income earned abroad until they bring the money back ('deferral'). In that case companies with their headquarters in the U.S. and delivery centres (shared service centres/ captives) outside th...