In another event that renewed heated debate on the outsourcing controversy, in March tax authorities of the state of California denied Indian software services giant Infosys plea to file its tax returns under an alternative methodology allowed by the laws of the state.

For the company, which has its US headquarters in Fremont, CA, the tax for the financial years of 2000-01 and 2002-03 amounted to $1.3 million under the standard method. This tax liabilty would have been restricted to $180,000 if it had been granted its plea to file in the methodology provided under California Revenue and Taxation Code Section 25137. Infosys had pointed out in its plea that calculation of its taxes under the standard formula did not account for the fact that two thirds of its work was done offshore in India. The company is also said to have appealed that the wages of their California employees being nearly nine times of their Indian ones, the differential should be considered to prevent inflation of tax rates.

"Infosys pays taxes in all jurisdictions where it operates based on domestic regulations and also using internationally recognized practices. It has filed returns and paid taxes in the state of California as per regulations laid out in the domestic tax regulations. Infosys is not requesting for any tax breaks or incentives but has requested for a filing methodology that is permitted by the laws and regulations of the state of California," an Infosys statement said.

Meanwhile, the move seems to have invited a lot of flak from the politically explosive situation that America is in now with officials of the California government and tax authorities of the state reported to have been vociferously critical of the Infosys plea even after it was rejected.

A politician close to the controversy said, "Infosys represents the extreme of the outsourcing problem. They not only want to steal California jobs, they’d also steal the taxpayers’ dollars. That’s unfair not only to California workers, but to businesses as well."

The rejection of the plea and the near outcry following the same does not seem to have affected the industry much though—Wipro and TCS being two of the other big Indian IT companies that work out of California. The industry continues to sing a nothing-to-worry song even as it seems to hold its collective breath waiting for the American Presidential elections to end.

SATHYA MITHRA ASHOK in Bangalore

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