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Is US HIRE Act a bigger threat than hefty H1-B fee? Here's how it could impact skilled Indian workers
The proposed HIRE Act 2025 may impose a 25% tax on US firms outsourcing to foreign workers, impacting Indian talent amid rising H-1B visa fees.
If the US approves a new law that targets outsourcing, qualified Indian professionals who are currently struggling with the recently levied $100,000 H-1B visa fees may soon face another hurdle. The proposed Halting International Relocation of Employment (HIRE) Act 2025 might significantly reduce the need for Indian talent by imposing a 25% tax on US firms that pay foreign workers for services rendered within America.
Concerns rise over HIRE Act as US targets outsourcing
Speaking in an interview with DeKoder, former RBI Governor Raghuram Rajan expressed serious concerns about Trump's tariffs expanding beyond goods to services.
Rajan is worried about a proposed US measure that would tax the profits of US businesses that recruit foreign workers, which might have a big impact on India because these companies retain a lot of Indian workers.
“What we’re seeing is a creeping extension of tariffs from goods to services. This is a threat,” stated Rajan in the interview. “The HIRE Act could directly tax outsourced work, which has wide implications for countries like India that rely heavily on service exports.”
Rajan believes that the HIRE Act's ramifications could go beyond the recently enforced $100,000 fee for H-1B visa applicants filed after September 21.
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What is HIRE ACT?
Senator Bernie Moreno has sponsored the HIRE ACT, which intends to dissuade American corporations from outsourcing by prohibiting them from pursuing lower wages through offshore labor.
The bill's most important feature is that it seeks to tax US companies' “outsourcing” activities if the final user of the services is a US customer.
In order to guarantee that the advantages of this work benefit American consumers, the HIRE ACT imposes a 25% tax on outsourcing payments made by American corporations to foreign individuals.
Furthermore, US businesses will be unable to claim tax reductions connected to these outsourcing payments.
All US businesses that outsource business operations or hire foreign personnel will be subject to a 25% tax on payments made to foreign outsourcing organizations for services provided to US customers.
The phrase "outsourcing payment" refers to any premium, fee, royalty, service, charge, or other payment made to a foreign individual in the course of a trade or business, with regard to labor or services that directly or indirectly benefit American customers.
The HIRE ACT may have a big impact on BPOs, consultancy firms, and IT firms that work with American enterprises. It may also have a significant effect on Indian IT firms.
Here's how HIRE ACT may impact talented Indian workers
Fall in demand for outsourced jobs: Offshoring work to India will become less appealing if American companies are subject to a 25% outsourcing tax, which will result in fewer contracts and job opportunities for remote experts.
Stringent visa requirements: The HIRE Act strengthens a general sentiment that supports domestic hiring despite the fact it does not explicitly change visa regulations. In light of this, US companies may be less inclined to sponsor foreign workers under H-1B or L-1 programs.
Effect on IT exports from India: India's IT services sector receives the majority of its foreign exchange profits from US clients. Its competitive advantage would be diminished by the suggested levy, which may also discourage further investment in the industry.
