U.S. HIRE Bill Threatens Indian IT, BPM, and Global Capability Centre (GCC) Sectors

• The HIRE Bill, introduced by Republican Senator Bernie Moreno, aims to discourage U.S. firms from outsourcing jobs overseas.

• The proposed tax targets the revenue stream of Indian IT firms, which derive 50-60% of their total revenue from the U.S.

• The tax could increase client costs by up to 46% when the disallowance of deductions is factored in, potentially slashing the core operating profits (EBITDA) of major Indian IT companies by 4% to 8%.

• For leading Indian IT firms, the tax could compress operating margins by 300 to 700 basis points.

• The tax could accelerate the move towards hybrid and nearshoring models, where some work is moved to other countries like Canada, Colombia, and Mexico to remain close to U.S. clients.

• The HIRE Act could significantly challenge the cost-arbitrage factor, making it expensive for clients to purchase tech services from India.

• The exposure of small and midcap IT service firms is equal, if not higher, to that of the large IT service players.

• B.S. Murthy, CEO of Leadership Capital, estimates that the HIRE Bill could impact 40%-60% of the IT service cohort’s workforce and 30-40% of India’s IT-BPM workforce.

GCC Sector Disruption is important topic for Civil service exam (WBCS).

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