Nasscom 'Chucks' Schumer Bill

The anti-outsourcing lobby is finding its feet again in the form of a US senator carving out a new bill for the Congress anvil. Indian BPOs are perturbed but not too worried, as they prefer to wait and watch. The legislation in question is a new anti-offshoring bill that will impose an excise tax of 25 per cent on companies that transfer domestic customer service inquiries to foreign call centers.

The bill is being proposed by Democratic Party senator from New York Charles Ellis ‘Chuck’ Schumer. Objective: Levy a 25 cent tax on every customer service call originating from the US to an offshore agent.

In an industry which expects project pipelines to pick up in the wake of the worldwide economic crisis, such a move is bound to generate a sense of impending doom. Conversely, the captains of Indian BPO are not protesting too much, though the worry lines on their faces are discernible. “This is a wait-and-watch situation. The legislation is yet to be introduced, and hence, we cannot comment on it. Let’s cross the bridge when we come to it,” said an Infosys BPO spokesperson when contacted for the company’s comments.

“If the legislation makes it through Congress, we might see each offshore call being taxed a couple of cents. However, we don’t expect it to be passed. Moreover, only 2-3 per cent of such calls come to India, and it won’t have a significant impact on volumes or overall BPO exports,” said National Association of Software and Service Companies (Nasscom) president Som Mittal.

Nasscom, the nodal body for India’s IT services and BPO industry is closely watching developments on the Schumer plan, though its reactions to the bill do not presage any tragic development for the fortunes of the industry. “This bill is not just about India. Calls go offshore to Canada, Costa Rica, Phillippines and other geographies. That said, I would believe that such a move would erode the competitiveness of the industry worldwide,” Mittal said.

Nasscom chairman Harsh Manglik said that it is natural for a debate on the pros and cons of offshoring to crop up during a election year. “We are pretty vigorous in generating opposing points of view to such moves. Reactions to such bills will be diverse and from all sections of the industry. Hence, you can expect to hear more on this in the days ahead.”

The legislation will need companies to disclose to customers when they transmit their calls offshore and identify the country to which the call is being routed. Additionally, Schumer’s plan will require companies to reveal in quarterly and annual reports how many customer service calls they received and what percent of these were sent overseas.

Nasscom BPO forum chairman Vikram Talwar said if the proposed bill becomes law, a key area of activity to be affected would be nearshore services. “The real issue is the protectionist sentiment driving such moves and clearly discernible to the BPO industry at large,” Mittal added.

Even if the new bill is officially introduced, it is unlikely to have substantial impact on daily operating margins, according to a BPO company official who spoke on condition of anonymity. “The losses, if any from this bill, will be more spread out as offshoring is happening to more countries today than earlier. Besides, India’s revenues from non-voice services have been growing steadily down the years, and we are not heavily dependent on voice revenues as was the case five years ago,” he said.

Revenues from non-voice services rose 57 per cent in fiscal 2010 from 53 per cent in fiscal 2007, according to Nasscom. Revenues from clients in non-English speaking geographies rose 18.2 per cent in 2010 over 2007.