Biden Administration Plans a Surtax on Nearshore and Offshore Call Center Operations

It appears that both President Trump and President-Elect Biden actually have something in common – neither of them like call center offshoring. Historically you have seen Democrats more likely to oppose offshoring as Republicans support free-market capitalism. Trump bucked the trend with a massive push for keeping jobs in the U.S. The topic continually comes up during election cycles at both the federal and state level; President-Elect Biden has proposed a surtax on nearshore and offshore call centers. However, the success of this type of legislation either hasn’t passed or made a meaningful impact on the call center industry. Regardless, it is critical to be aware of what the potential implications might be on your call center site selection decisions from these proposed Biden policies.

How many nearshore and offshore call center jobs could be impacted?

It is estimated that over 3 million voice-related call center jobs in nearshore and offshore locations could be impacted by these policies. Of these jobs, it is estimated 1.3 to 1.5 million call center workers are in the Philippines and 1.1 to 1.3 million call center workers are in India. This doesn’t include more than 2 million back-office, non-voice workers in India. Nearshore countries spread across Latin America and the Caribbean add an additional 800,000 to 1 million call center jobs. This doesn’t even include other offshore locations in Eastern Europe and Africa. To learn more about the size of the global call center market, you can reference our blog
How Big is the U.S. Call Center Market Compared to India, Latin America and the Philippines. 

What is Biden’s strategy to curb offshoring?

According to Biden’s website, the incoming administration supports outsourcing policies which are intended to bring jobs to the U.S. The following is an excerpt from the Biden plan:

As part of their plan to Build Back Better, Biden and Vice President-Elect Kamala Harris are announcing two steps to promote their Made in America plan:

1. Biden and Harris plan to adjust the tax code so that it promotes a “Made in America” future, establishing a offshoring tax penalty and a tax credit for goods made in America. It would also close existing offshoring Loopholes.
2. Biden said he will sign a series of executive actions to ensure the federal government is delivering on its obligation to use taxpayer dollars to Buy American products and support American supply chains.

What does all of this mean to companies making offshore site selection decisions?

All of this could mean nothing if the legislation can’t pass through the Senate. However, if it did, then the Offshoring Tax Penalty would establish a 28% corporate tax rate plus a 10% Offshoring Penalty surtax. This surtax would apply to U.S. companies with call centers located offshore. This amount would erode some of the value proposition of nearshore and offshore geographies; however, it still wouldn’t be enough to wipe away an average of over 50% cost savings associated with operating in the U.S. versus offshore.  

Conclusions

The incoming Biden administration will have its hands full trying to push through these policies especially if Democrats don’t gain control of the Senate. The odds are significantly against this legislation passing but it will still create uncertainty for corporations trying to make call center site selection decisions.