IT industry worried about US 'protectionism'

Software firms association Nasscom today sought to downplay US President Barack Obama's decision to end tax breaks for companies shipping jobs abroad, saying the real worry is "protectionism" and not tax breaks.

"I think the concerns that we have is about indirect protectionism. I don't think tax break issue is really the one which is important for us. Obama's comment was not related to outsourcing. Its about US companies operating in regions where they get tax benefits," Nasscom Vice President Ameet Nivsarker told PTI.

In his first State of Union address, Obama today said: "To encourage... Businesses to stay within our borders, it is time to finally slash the tax breaks for companies that ship our jobs overseas, and give those tax breaks to companies that create jobs right here in the United States of America."

"...People are out of work. They're hurting. They need our help...," Obama said.

Nivsarkar said that the move will hit American companies more than $60-billion Indian IT and outsourcing industry, which earns more than half of its revenue from the US.

"The whole issue about taxing companies, which were shipping jobs overseas and taking away tax breaks actually does not relate to the work that is done out of India or other locations. That is really about US subsidiaries which have set up plants overseas," he added.

Obama's remarks seemed to have no impact on IT stocks, with Wipro trading higher by 3.19 per cent at Rs 675.35 and Infosys up marginally at Rs 2,504 on the BSE. Only TCS shares were down slightly at Rs 740.