- 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.
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- 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.
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- 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.
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- "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.
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- "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.
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- 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.
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- "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."
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- "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.
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- 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.
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- 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.
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- 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.
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- "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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