'No to Bangalore and Yes to Buffalo' will not do good to America

Some of the changes in the tax structure proposed by the USA President Obama are not only controversial but also counter productive. For last two decades international community is supporting free trade and economists have argued the benefits of the globalisation for the people living under the line of poverty in the developing and the under-developed countries. With the spread of benefits of globalisation to less developed countries, number of middle class has increased by hundreds of millions. This population has started consuming products and for many companies they are becoming major markets. For the mobile companies India and China are growing markets. Vodafone has made one of the biggest investment in India.

Using the term 'American' companies is wrong in itself because unless a company is public company (owned by the government), a company can not and does not have nationality. Companies operate to make more profit by operating in many geographies and transfer resources to growing markets. A law can not be formulated that says that these particular jobs by these particular companies can not be performed in these particular countries. In this scenario, these proposed changes only decentivised the companies to have headquarters in America. Jeffrey Immelt of GE has openly expressed his views that the future growth of the company is possible in the developing countries. But this is not only about the developing countries only, each and every big company based in USA has some sort of operations outside America. It can not be imagined that a company will go to France, India, China or Brazil but still produce everything in America. Companies need to run their operation in an efficient and effective way to make more profits. Even if they do not pay taxes in America, they will have bigger and fatter balance sheet that allows America to borrow from different countries and run the economy in deficit.

Rather than taxing the companies on foreign operation, companies should be provided incentives to move operation into America regardless of the location of their headquarters. A Japan based company if creates jobs in America and pays its legitimate taxes on income, it should also have access to tax benefits. America need to realise and face the reality that if GM or Chrysler do not operate efficiently but have headquarter in America then this is not merit for a company to survive for ever. It need to die.

Though the proposed changes will be effective from 2011 so there is plenty of time to revise and make appropriate changes or even drop once the economy starts recovering and Obama does not need populist policies.