US ‘HIRE Act’ Proposes 25 Per Cent Outsourcing Tax, Posing Fresh Challenge To Indian IT Services Sector

A new Bill introduced in the US Senate threatens to undermine India’s IT services advantage by targeting American companies that outsource jobs overseas, the Business Line reported.

Ohio Republican Senator Bernie Moreno on Friday (5 September) tabled the Halting International Relocation of Employment Act (HIRE Act), which proposes a 25 per cent tax on “outsourcing payments.”

These include fees, royalties, service charges, or other payments made by US businesses to foreign providers, if the services ultimately benefit American consumers. The Bill also bars such payments from being claimed as tax deductions.

Senator Moreno argued that companies must stop “chasing cheap labour overseas,” adding that the Bill will be pushed to the Senate floor next week to test bipartisan support.

The US remains the largest market for Indian IT firms and Global Capability Centres (GCCs).

If enacted, the measure could significantly raise outsourcing costs for American firms, potentially forcing them to shift to nearshoring or domestic hiring.

Industry experts, however, believe the impact may be limited.

“If the Bill does get passed, which seems a bit unlikely, it will be an additional tax burden on US enterprises and will put pressure on their margins to that extent, but it may not put a complete halt to outsourcing plans,” founder and CEO of UnearthInsight, Gaurav Vasu, was quoted by the Business Line as saying.

He noted that access to large-scale, skilled, and cost-efficient talent overseas will remain essential for US companies.

Since the HIRE Act seeks to raise revenue, legislative procedure requires it to originate in the House of Representatives rather than the Senate. This adds a hurdle to its passage and raises uncertainty over whether the proposal will advance further.

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