Friday, June 18, 2010

Will a Call Center Tax Improve the Unemployment Problem?

Many of you may not be familiar with the newly proposed “call center tax,” however the topic is likely to gain a decent amount of attention over the next few weeks. To help all of my readers stay updated on this recent tax law development, I have put together the following article explaining this new and controversial tax proposal.

The Basics

Senator Charles Schumer (D, NY) recently proposed new legislation to tax US companies - $0.25 per call that is outsourced to a foreign call center. The idea behind the suggestion is to encourage businesses to use domestic call centers, in hopes that this would help reduce unemployment numbers. The proposed law would also require that consumers are warned that their call was being transferred to a foreign call center.

No tax would be imposed on domestic call centers, as Schumer is hoping this will “provide a reason for companies that have already outsourced jobs to bring them back.”

History of Job Losses

Statistics from the Technology Marketing Corp. show that between 2001 and 2003 the United States lost approximately 250,000 call center jobs to India and the Philippines alone. Additionally, reports show calls from within the U.S. are often routed to Indonesia, Ireland, Canada, and South Africa. Wages are much lower in these countries and companies operated in the United States can often reduce expenses by outsourcing calls.

Cost Effective?

Since 2003 the country has gone through an economic recession and more Americans are willing to take lower paying positions as unemployment problems continue. In fact, new call centers have been set up in North Dakota, Michigan and Nebraska that have become increasingly competitive with off shore centers.

Breaks, Not Penalties

As opposed to enacting a “penalty” excise tax on businesses that do outsource, some experts are suggesting that the government provide tax breaks to domestic call centers. This would help the economies of the states like North Dakota, Michigan and Nebraska and also provide incentive to businesses to keep call center and related jobs in the United States. However, other economists argue that in today’s international economy, call centers could easily reduce prices to stay competitive no matter what the federal government does.

Protection for Consumers

Senator Schumer claims the proposed law would serve to protect the privacy of American consumers. Many of the places to which calls are currently being outsourced do not have the same strict regulations regarding the storing of personal information such as credit card numbers. Therefore, to incentivize the use of domestic call centers by US companies, more consumers would know their personal information is being stored securely.

Potential Issues with WTO

Some critics of the proposal are warning that it could raise the potential of retaliation from other countries because of WTO agreements. Reportedly, taxing only international calls violates the “basic principle of national treatment.” According to “imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services.”

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