US tax returns to India causing stir

THE TIMES OF INDIA ^ | APRIL 16, 2003 | CHIDANAND RAJGHATTA

[John Lenin]

WASHINGTON: Millions of Americans sweated it out on Tuesday, struggling to meet the deadline - April 15 - for filing their annual tax returns as accountants and post offices stayed open late to accommodate the laggards. Many will be hoping the Indians have lived up to their reputation for sound number-crunching.

 

In keeping with the great outsourcing trend that has swept across American businesses, thousands of US tax returns are now being processed in India, a development that has led to quite a stir in the accounting community. Numbers are hard to pin down, but according to Kishore Mirchandani, president of Outsource Partners International, the firm that claims to have triggered the development, more than 10,000 returns went to India for scrutiny this year.

 

The accounting firm Ernst and Young alone is believed to have forwarded 7500 American tax returns to its subsidiary in India after transferring a tax partner familiar with US tax laws there. Scores of other smaller accounting firms have also sent returns numbering hundreds to India after a pilot study last year showed encouraging results.

 

"The business is still in its infancy, but we are looking at over 100,000 returns going to India this coming year," says Mirchandani, whose firm has a 300-person operation in Bangalore and is looking to expand because of the growing demand. Several traditional American firms are also lining up to send returns to India, after pilot projects showed significant reductions in costs and turn-around times.

 

"More and more firms are jumping on the bandwagon after seeing the results. They seem very satisfied with the quality, not to speak of the speed and cost factors," says Bill Carlino, Editor-in-Chief of the journal Accounting Today, which has tracked the trend over the past year.

 

Expectedly, not everyone is thrilled with the outsourcing of what some regard as sensitive financial information. In the latest issue, the magazine Practical Accountant ran a column by a New York accounting professor questioning the trend on grounds of security and job loss to Americans.

 

"If you were to stop by any downtown skyscraper where Ernst & Young has an office, I guarantee that you could not just walk to the elevators and go up to the company's offices. You would be stopped by at least one security officer before you got anywhere near the elevator bank," wrote Prof Lloyd Caroll, head of the accounting department at Manhattan Borough Community College. "Yet the company does not appear to be troubled by the notion of putting taxpayer security in peril by sending returns out of the United States."

 

"The very notion of transmitting confidential tax data - from Social Security and employer identification numbers to financial information - to any foreign country, even Canada, borders on the reprehensible at best, and is treasonous at worst," Caroll fumed.

 

But accounting firms say security is a non-issue. What they are moving to India are only images and the original data remains with the US firm. The software used by the firms is also web-enabled and is accessed by the Indian subsidiary through a server in US.

 

Firms also reported a 50 to 60 per cent cost reduction, besides improved scrutiny because they are able to hire better qualified people. In the US, simple returns are often viewed by junior staff who are not CPAs.

 

Although the pilot studies of last year involved sending simple low end returns, some firms such as Toronto's Horwath Ornstein are now said to be sending high-end returns. In turn, firms are also posting Indian-American CPAs qualified in US tax laws to India

to oversee the work.

 

"The accounting profession in India itself has improved a great deal and quality should not be a problem," says Ram Ganesan, a Maryland-based CPA, who practices in the United States but sees outsourcing as an encouraging trend.

[Beck_isright]

"There is a good chance the Indians will lose the forms and the IRS will have to sue them."

The IRS never blames it's contractors. They will claim you never filed and slam you with penalties. The man with the gun always wins.

[plusone]

True, those types of sevices are hard to export. But if everyone else is un/under-employed, who will have the money to hire plumbers, electricians, mechanics, etc?

[plusone]

Let's outsource the politicians. Bring in Russian politicians. Twice as corrupt, but work for only a tenth the price. A deal!!!

[Beck_isright]

At least the Russian politicians had the cahones to pass a flat tax. Don't look for our cowards to ever do that in our lifetime.

[Black Agnes]

Ping.

[Fee]

That is why country club types, upper middle class types do not want the private American to own guns. That way they can export all the jobs, maximize the profits, go home to their gated communities serviced by their own armed security forces while the rest of us, unarmed and helpless watch from the outside in poverty. If it gets that bad, any poor person who can fashion a knife will be lethal. Think about it, they have to leave their homes to go shopping somewhere.

[Cultural Jihad]

Shrinking salaraies of American programmers is not good. The plus side is that if you are a program consumer, the prices are not as high as they would be otherwise. Should we repeal the law of supply and demand?

[nopardons]

The salaries were going to shrink anyway. The " BOOM burst with the BUBBLE. It's not unlike the doomed whaling industry, but better, since no one is about to give up computers, as they did corsets and whale oil for lamps.It's closer to blacksmithing.

[Beck_isright]

You can't have your cake and eat it too. If it's ok to ship off manufacturing jobs, it's ok to ship of I.T. jobs. We can not have a double standard. But I still think there are better ways to do this than we have. We are going to weaken our ability to innovate if all the programmers have to become plumbers, etc. This is not wise policy, IMHO.

[busybody]

Massachusetts, Maine, New Hampshire Freepers ... let's stop whining about how are jobs are being sent overseas and actually do something about it. See my post at the following link http://www.freerepublic.com/focus/f-news/894818/posts

[USMMA_83]

How does a blind woman know she's in the Bay area as opposed to Boise? You sound like another excuse monger...get a life, and quite bitching....

[Cultural Jihad]

Well, the retired investors who hire the programmers to begin with get a higher return on their investments, which they can then plow back into the economy to create more jobs. I agree there are concerns about manufacturing moving overseas, which might not be in our longterm self-interest. We could raise taxes and subsidize local steel and shipbuilding trades, etc. to a certain extent. But the trend is toward globalization, which isn't necessarily a bad thing in my estimation.

[Cultural Jihad]

Hehehe. Marketing jobs will never be outsourced to, say, China or India. A marketing person needs to know English and local culture. That is one reason that Chinese and Indians are prevalent in the abstract sciences and technical fields, mostly because their skills transcend language barriers.

[NYC Republican]

When will the backlash begin??? Here's what I mean...

Right now, American Express and countless others utilize India and other countries as a source of cheap labor... What would happen if a smaller up-and-coming financial industry advertises by saying that "we support the American worker and American economy, we don't outsource, and only hire Americans".

Think about it. I would probably switch, if only because I'm in the financial industry. I'm sure others would too.

All things being equal, why wouldn't we bank/have credit cards/shop somewhere where Americans are being assisted by our hard-earned dollars?

Any thoughts?

[NYC Republican]

Do you really think that can't be taught? Do you have any idea how often we call a credit card company, thinking we're talking to an American, when it's an Indian from India? They are shipped over here, spend considerable time learning English and getting rid of the accent.

Don't believe me? Look it up. Or better yet, next time, ask them. They may tell you the truth

[USMMA_83]

Think again! Indian nurses and teachers are being recruited in India at an alarming rate. American's just don't want to get into the nursing and teaching professions. They all want to be wall street brokers, etc. All want easy money without having to learn biologoy, chemestry and calculus. That will be our downfall! The fact that the average highschool graduate does not know elementry statistics is a heads-up to everyone concerned. At some point, we decided that an MBA was the ideal, while a poor sob who studies Math, physics or Chemestry is a geek to be laughed at.

[USMMA_83]

You are in trouble...trust me. Take a flight to Banglore, and see for yourself. Most special effects work is being done here now.

[aruanan]

I don't think this is a good idea at all.

You're not an American CPA charging big bucks to do someone's taxes and living like a parasite off the misery created by the U.S. tax code, are you?

[meatloaf]

You obviously didn't read the NYT article about the Philipine government setting up effective ways of training amd enabling nurses to take jobs in other countries and sending the money home.

B O H I C A !

[Arthalion]

We're setting ourselves up for one hell of a fall. In the future, terrorists won't need to fly jumbo jets into skyscrapers to attack America, they can simply cut a few strands of trans-Pacific fiber and watch our economy implode as the "workforce" is disconnected from the "home office". Of course, I figure that the chronic unemployment caused by millions of outsourced jobs will probably be imploding our economy on its own by then.

The U.S. was created as a free market, but even the founding fathers understood the need to impose tarriffs to protect our own citizens from foreign predation. We need a 500% yearly "job export" tarriff NOW, but since both the Republicans and Democrats seem to be quite comfortable in their corporate-pocket homes, I doubt we'll see that any time soon.