US law could end overseas call centres

The days of off-shore call centres in countries such as India may be numbered if legislation introduced in the United States congress succeeds.

Senator Chuck Schumer has proposed a bill to impose a 25 cent tax on any US customer service inquiry that's passed on to call centre personnel overseas.

Schumer, recently in the news as one of three US senators who referred social networking giant Facebook to the US Federal Trade Commission, has introduced the bill in an effort to protect US jobs by curbing the "off-shoring" of services such as call centres and technical support.

During his election campaign, President Obama also indicated that he supported higher taxes on firms that sent jobs overseas.

Senator Schumer estimates that 1.6 billion calls are re-routed from the US to other countries each year. His proposed tax would land American companies with a $400 million bill.

Schumer said in a statement: "If we want to put a stop to the outsourcing of American jobs, then we need to provide incentives for American companies to keep American jobs here."

But Kent Gardner, an economist with the Center for Governmental Research in Rochester, warns that Schumer's plan could lead to the slippery slope of protectionism. "The Senator’s intent is certainly laudable - we all want to promote job creation in the United States," says Gardner. "But we have to be careful that we stick with policies that promote fair trade. If we want to tax sales to call centres in, say, Chennai or Mumbai in India, then we have to expect the Indians to tax sales of Kodak digital technology or Harris RF Communications equipment to India. Eventually we all lose."

Another critic of the plan, analyst Ian Jacobs of Ovum, said Schumer's proposals could have the unintended consequences of simply increasing costs for consumers, or relocating call centres to even cheaper destinations in an attempt to mitigate the cost of the new tax.