US tax returns to India causing stir

R. A. Hettinga rah at
Wed Apr 16 23:38:01 PDT 2003


The Times of India Online 

US tax returns to India causing stir 

TIMES NEWS NETWORK [ WEDNESDAY, APRIL 16, 2003  08:28:39 PM          ] 

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. 


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. 


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. 


"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. 


"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. 


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. 


"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 ." 


"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. 


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. 


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. 


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. 


"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. 

R. A. Hettinga <mailto: rah at>
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