Nishith Desai Associates Legal and Tax Counselling Worldwide [email protected] VAIBHAV...
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Transcript of Nishith Desai Associates Legal and Tax Counselling Worldwide [email protected] VAIBHAV...
Nishith Desai Associates
Legal and Tax Counselling Worldwide
www.nishithdesai.com
VAIBHAV PARIKHVAIBHAV PARIKH
A PRESENTATION ON
MOVEMENT OF NATURAL PERSONS MOVEMENT OF NATURAL PERSONS UNDER THE GATS IN UNDER THE GATS IN
COMPUTER AND RELATED SERVICESCOMPUTER AND RELATED SERVICES
ON BEHALF OF NASSCOMNASSCOM
BY
SYNOPSISSYNOPSIS
• IT software and services sector in India: An introduction
• Issues / constraints facing the movement of software professionals (natural persons)
• Necessity for freer movement of natural persons under the GATS
• Policy initiatives and reforms
Nishith Desai AssociatesNASSCOM
itit SOFTWARE AND SERVICES SOFTWARE AND SERVICES SECTOR IN INDIASECTOR IN INDIA
• This sector accounts for
– 16% of the country's overall exports;
– 500,000 jobs; and
– US$ 1.6 billion in investments.
Nishith Desai AssociatesNASSCOM
DOMESTIC SOFTWARE MARKETDOMESTIC SOFTWARE MARKET
Source:www.nasscom.org
Nishith Desai AssociatesNASSCOM
SOFTWARE AND SERVICES SOFTWARE AND SERVICES EXPORTSEXPORTS
Source:www.nasscom.org Nishith Desai AssociatesNASSCOM
SOFTWARE DESTINATIONSSOFTWARE DESTINATIONS
Source:www.nasscom.org
Nishith Desai AssociatesNASSCOM
INDIAN SOFTWARE EXPORTS: INDIAN SOFTWARE EXPORTS: DELIVERY MODELSDELIVERY MODELS
Source:www.nasscom.org
Nishith Desai Associates
Delivery 1999-00 2000-01 2001-02 (Projected)
Onsite 57.4% 56.1% 47.3%
Offshore 34.7% 38.6% 48.6%
Products and unclassified
7.9% 5.3% 4.1%
Total (US$ Billions)
2.65 6.2 7.7
NASSCOM
BIRD’S EYE VIEWBIRD’S EYE VIEW
Nishith Desai AssociatesNASSCOM
ServicesGATS
Mode 3Mode 1
Mode 4
ProductsGATT
Productized services
Servicized Products
NEED FOR MOVEMENT OF NEED FOR MOVEMENT OF NATURAL PERSONSNATURAL PERSONS
• Globalisation of economic-activities and technological developments
• Facilitation of cross-border trade in services• Leveraging on the expertise and skill that
Indian software professionals possesses in order to reach out to a global market
• Direct contact between supplier and consumer necessary for effective services
Nishith Desai AssociatesNASSCOM
ISSUES / CONSTRAINTSISSUES / CONSTRAINTS
• Immigration related issues
• Inadequate recognition of qualifications, experience and training
• Differential treatment of foreign service personnel
Nishith Desai AssociatesNASSCOM
IMMIGRATION ISSUESIMMIGRATION ISSUES• Visa Requirements
– Prior adequate search in national markets– Wage parity requirement
• Negates cost-based advantage of developing countries
– Differentiation in processing permits based on the level of employment
• Faster to process intra-company transferee permits for higher level employees than permits for software professionals system analysts and database consultants
Nishith Desai AssociatesNASSCOM
IMMIGRATION ISSUESIMMIGRATION ISSUES• Visa Requirements (contd.)
– Cumbersome procedure for issuance of work permits
• Time frame of 2 weeks to 3 to 4 months, or even longer!
– Quota restrictions• H-1B visa quota – Cap on economic expansion
– Restrictions on transferability and mobility– Limitation on duration of stay
• Economic Needs, local market needs test
Nishith Desai AssociatesNASSCOM
INADEQUATE RECOGNITIONINADEQUATE RECOGNITION• Foreign countries find the educational and
work experience / training qualifications of software engineers to be insufficient– Eg. UK – Five years of experience or
graduation and two years of senior post-graduation work experience
– Eg. U.S. – 3 years professional experience
• Issue: Indians may be sufficiently skilled without satisfying the above criteria
Nishith Desai AssociatesNASSCOM
DIFFERENTIAL TREATMENTDIFFERENTIAL TREATMENT• Tax implications on temporary foreign
service providers– Social security taxes in the US – no tax credit in
home country – erodes the cost advantage
• Government procurement policies favour domestic suppliers – eg. data processing
• Government approval required– Setting up operations – nature of entity and
establishment of local offices– Remittance of foreign exchange
Nishith Desai AssociatesNASSCOM
DRAWBACKS / LOSSESDRAWBACKS / LOSSES
• Loss of business opportunities
• Higher costs for the customers / consumers
• Uncertainty, delays in deputing personnel
• Difficulties in transferring between sites in host country
• Wage parity condition erodes cost advantage
Nishith Desai AssociatesNASSCOM
BROAD POLICY INITIATIVES/ BROAD POLICY INITIATIVES/ REFORMSREFORMS
• Improving the structure of GATS commitments
• Removal of existing limitations
Nishith Desai AssociatesNASSCOM
IMPROVING THE STRUCTURE OF IMPROVING THE STRUCTURE OF GATS COMMITMENTSGATS COMMITMENTS
• Horizontal Commitments– Specifically include individual professionals– Clear eligibility criteria to be determined– Uniformity in definitions– Further expansion to include middle and lower
level professionals in the category of “other persons” or “specialists”
Source: India’s proposal to WTO
Nishith Desai AssociatesNASSCOM
IMPROVING THE STRUCTURE OF IMPROVING THE STRUCTURE OF COMMITMENTSCOMMITMENTS
• Sectoral Commitments– Developed countries to make commitments in
all sub-sectors for computer and related services.
Source: India’s proposal to WTO
Nishith Desai AssociatesNASSCOM
REMOVING EXISTING REMOVING EXISTING LIMITATIONSLIMITATIONS
• Visa requirements– Transparent visa application procedures– Simplify application procedures– Less stringent norms for entry and stay– Remove labour conditions for specialty occupations
(US)– Remove labour market test requirement for all
specialists (Australia)– Establish guidelines for wage parity– Impose conditions to prevent exploitation of foreign
workers– De-link temporary visas from permanent visas
Nishith Desai AssociatesNASSCOM
REMOVING EXISTING REMOVING EXISTING LIMITATIONSLIMITATIONS
• Clear criteria for the Economic Needs Test
• Social Security and Totalisation issues– Bilateral agreements – Exemptions from contributions for professionals
of developing countries
• Recognition of work experience and qualifications of IT professionals
Nishith Desai AssociatesNASSCOM
WAY FORWARDWAY FORWARD
• Liberalization of Mode 4
• Amendments in domestic regulations
• Formation of international and bilateral agreements and treaties
• GATS Visa – Debate already initiated
THANK YOUTHANK YOUNishith Desai AssociatesNASSCOM