The Problem with Schumer's Plan to Tax Offshore Call Center Use

U.S. Senator Charles Schumer says he plans to propose a bill to curb the use of foreign call centers and bring call center jobs back to American shores, but the legislation could prove more costly to the government than to companies that outsource overseas.

By Stephanie Overby
Thu, June 03, 2010

CIO — Senator Charles Schumer (D-NY) said this week that he will introduce an anti-offshoring bill that would impose an excise tax on companies that transfer domestic customer service inquiries to foreign call centers.

Specifically, the bill would levy a 25 cent tax on every customer service call originating in the U.S. that is transferred to an agent offshore. The intended legislation would also require corporations to disclose to customers when they transmit their calls offshore and to identify the country to which the call is being routed. Additionally, Schumer's plan would require companies to reveal in quarterly and annual reports how many customer service calls they receive and what percent are sent overseas.

By raising the cost of sending call center work offshore through a tax and introducing the burden of reporting, Schumer says the law would help to "maintain call center jobs currently in the United States" and "provide a reason for companies that have already outsourced jobs to bring them back."

Outsourcing industry watchers say such legislation could easily pass given the current political climate. "We have been tracking legislation in this arena since 1999, and this seems to be the most politically charged environment against offshore sourcing," says Atul Vashistha, chairman of offshore outsourcing consultancy NeoIT Advisory.

"For the anti-offshore/outsourcing politicians, it's a given to support this," adds Phil Fersht, founder of outsourcing analyst firm Horses for Sources.

According to Schumer's plan, companies would have to certify annually with the Federal Trade Commission that they are in compliance with the offshore call center rules, or be subject to civil penalties. But the logistics involved in actively policing offshore call center traffic could prove much more costly to the federal government than to companies that outsource overseas.

"It would be huge," Fersht says of the logistics, noting that there are more than 30 million businesses in the U.S. that would have to be regulated.

"The costs of setting this up and managing it would take a long, long time to recoup at 25 cents a call," adds Fersht. "It sounds like a huge waste of public money and resources. The government would be better off investing those funds in helping U.S. business set up onshore."

Schumer said that any money collected would be used to address the security issues involved in the use of offshore call centers, including access to personally identifying information such as bank account numbers, credit information, or medical histories, although he did not explain what security measures might be enacted with the funds.

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