EU brings outsourcing under VAT

[Robert Oak]

The European Court of Justice has ruled that the services provided by Accenture, which was for insurance companies, cannot be qualified as an insurance service.

This means that the outsourced services provided by Accenture will now be taxed at the rate of 17.5%.

While the judgement pertains to Accenture it has an impact on all outsourcing companies in Europe. If the courts start looking at outsourcing as a service that needs to be taxed separately it will have a negative impact on the cost of these services and will serve as a deterrent to outsourcing within Europe.
http://economictimes.indiatimes.com/articleshow/msid-1060433,curpg-1.cms

Gee, wiz, let's join the EU.

[EVDebs]

1. We need a similar Court of Justice for economic matters like this

How do we go about getting one ? Our Dept of Labor is a joke and actively encourages the outsourcing of US jobs. For that matter so does the rest of the administration's branches.

With 'friends' like these in Congress and the executive branch, who needs enemies !

[Robert Oak]

2. well, for a start it sure would be nice to have a politic party

active in our best interests...

right now we have democrats wanting Hillary, the outsourcess herself
as the nominee!

How do we get a political party that actually is unified and represents
the people?

[Sinistrous]

3. However, the VAT (Value Added Tax) might be a hard pill to swallow

if it is instituted on all domestic transactions.

[Robert Oak]

4. what I got out of the EU decision

is it's offshore outsourcing, outside of the EU.

Fairly surprising measure for we certainly haven't been saying that's
the answer, more stop the incentives to offshore outsource and then
ban any government contracts, use of US taxpayer money and so forth...

It will be interesting to watch what happens with this and if it
hurts them overall (the "T" word basically).

[Sinistrous]

6. I concur that the US must cease rewarding outsourcing

and proceed to penalize it. However, I was only focusing on the VAT as the mechanism. I assumed (wrongly, I now see) that a VAT would have to be in place in the US to implement a similar tax. So, yes, such a tax could be imposed by specific legislation, without prior implementation of a VAT on the entire economy.

[applegrove]

5. Smart. Now we are talking. Go for the third way!!

[fedsron2us]

7. Interesting ruling but I suspect that the issue is quite complicated

It appear that Accenture had tried to avoid VAT because the service they were providing was for an insurance company that was in a VAT exempted business. Outsourced services in sectors that were not VAT exempt would have already been paying the duty so would not have been effected. The story in the Economic Times actually claims this move will boost BPO outsourcing to India. However, this may just be wishful thinking on their part since the EU intend to levy VAT on outsourcing services provided from outside the EU by 2007. In fact, the scope for outsourcing European services to India outside the English speaking countries is aleady limited by the language barrier. There simply are far too few French, German, Spanish or Italian speakers on the sub continent to make this truely viable.

http://travel.telegraph.co.uk/money/main.jhtml?xml=/money/2005/03/04/cnprem04.xml

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