US tax returns to India causing stir

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: 
Date: Wed, 16 Apr 2003 22:37:50 -0700
To: David Farber <dave () farber net>
Subject: US tax returns to India causing stir

[Hi Dave, no attribution, thanks.]

The article below is here:
http://timesofindia.indiatimes.com/cms.dll/xml/uncomp/articleshow?msid=43584
938
This article adds detail:
http://seattletimes.nwsource.com/html/businesstechnology/134676517_taxtoindi
a16
.html

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CHIDANAND RAJGHATTA

TIMES NEWS NETWORK[ WEDNESDAY, APRIL 16, 2003 08:28:39 PM ]

WASHINGTON: Millions of Americans sweated it out on Tuesday, struggling to
meet
the deadline - April 15 - for filing their annual tax returns as accountants
and post offices stayed open late to accommodate the laggards. Many will be
hoping the Indians have lived up to their reputation for sound
number-crunching.

In keeping with the great outsourcing trend that has swept across American
businesses, thousands of US tax returns are now being processed in India, a
development that has led to quite a stir in the accounting community.
Numbers
are hard to pin down, but according to Kishore Mirchandani, president of
Outsource Partners International, the firm that claims to have triggered the
development, more than 10,000 returns went to India for scrutiny this year.

The accounting firm Ernst and Young alone is believed to have forwarded 7500
American tax returns to its subsidiary in India after transferring a tax
partner familiar with US tax laws there. Scores of other smaller accounting
firms have also sent returns numbering hundreds to India after a pilot study
last year showed encouraging results.

"The business is still in its infancy, but we are looking at over 100,000
returns going to India this coming year," says Mirchandani, whose firm has a
300-person operation in Bangalore and is looking to expand because of the
growing demand. Several traditional American firms are also lining up to
send
returns to India, after pilot projects showed significant reductions in
costs
and turn-around times.

"More and more firms are jumping on the bandwagon after seeing the results.
They seem very satisfied with the quality, not to speak of the speed and
cost
factors," says Bill Carlino, Editor-in-Chief of the journal Accounting
Today,
which has tracked the trend over the past year.


Expectedly, not everyone is thrilled with the outsourcing of what some
regard
as sensitive financial information. In the latest issue, the magazine
Practical
Accountant ran a column by a New York accounting professor questioning the
trend on grounds of security and job loss to Americans.

"If you were to stop by any downtown skyscraper where Ernst & Young has an
office, I guarantee that you could not just walk to the elevators and go up
to
the company's offices. You would be stopped by at least one security officer
before you got anywhere near the elevator bank," wrote Prof Lloyd Caroll,
head
of the accounting department at Manhattan Borough Community College. "Yet
the
company does not appear to be troubled by the notion of putting taxpayer
security in peril by sending returns out of the United States."

"The very notion of transmitting confidential tax data - from Social
Security
and employer identification numbers to financial information - to any
foreign
country, even Canada, borders on the reprehensible at best, and is
treasonous
at worst," Caroll fumed.


But accounting firms say security is a non-issue. What they are moving to
India
are only images and the original data remains with the US firm. The software
used by the firms is also web-enabled and is accessed by the Indian
subsidiary
through a server in US.

Firms also reported a 50 to 60 per cent cost reduction, besides improved
scrutiny because they are able to hire better qualified people. In the US,
simple returns are often viewed by junior staff who are not CPAs.

Although the pilot studies of last year involved sending simple low end
returns, some firms such as Toronto's Horwath Ornstein are now said to be
sending high-end returns. In turn, firms are also posting Indian-American
CPAs
qualified in US tax laws to India to oversee the work.

"The accounting profession in India itself has improved a great deal and
quality should not be a problem," says Ram Ganesan, a Maryland-based CPA,
who
practices in the United States but sees outsourcing as an encouraging trend.




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