According to published reports, analysts both overseas and in the U.S. note that President Obama’s State of the Union statement about revoking tax breaks for companies outsourcing jobs could open a ‘Pandora’s box’ full of problems.

A survey by independent analysts in India, Asia Sentinel of industry officials, finds that the nature of outsourcing itself does not lend itself to taxation on U.S. firms outsourcing jobs abroad.

New Delhi-based consultant, John Daval told Asiasentinel in an interview,
“This is a really a complex issue as enormous job losses have taken place in the US and it is difficult to quantify the exact tax losses triggered by outsourcing.”

He added, “On the contrary, if Obama’s measures are implemented, US consumers may end up paying higher taxes as service costs will also shoot up. Ultimately, this embargo will have to go, as it also violates the American tenets of free trade and globalization.”

Daval noted that the outsourcing has led to more competitiveness among U.S. firms and generated more jobs within the U.S. as well.

Analysts agree that if the President’s tax policies are executed, it remains uncertain how these measures will be carried out. For instance, how would the administration target corporations that find loopholes against taxation or how would the U.S. government trace the flow of work out of the country? These questions have left the outsourcing industry baffled since the comments were made in a televised speech last week.

Nonetheless, it is an issue that has fervent followers on both sides. Some Americans worry that unemployment is skyrocketing in the wake of a recession brought on the by the subprime debacle and an ensuing credit crisis. A Forrester Research report found that approximately 3.3 million U.S. jobs are likely to be culled due to outsourcing for the fifteen years up to 2015. Moreover, Indian BPO vendors are projected to dominate 10 percent of the world’s market by the end of 2010, according to advisory firm Gartner.

Yet another school of thought takes the position that a move to diminish outsourcing would mean a significant import for India. Indian is among the five hotspots for off shoring along with the Philippines, Ireland, China and Brazil, reports international advisory firm Tholons.

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