Tax Avoidance Schemes by the Offshoring Outsourcers – Let’s Outsource the Outsourcers !!

Pissed Uncle SamAs an IT Professional for over 20 years running an IT Consulting firm, I have seen year after year changes in our Industry that negatively impact the American people and our U.S. based businesses in the IT Industry. Many companies have turned to Outsourcing Offshore as means to cut cost, but this cut in cost comes with price…and that is … the destruction of Opportunity and the American Dream for our experienced IT Professionals, as well as, lost opportunity for our kids who are innocently pursuing degrees in Computer Science.

In my opinion the largest culprits in the demise of our industry are just hand full of IT firms that provide IT Consulting. Some of these firms are foreign based firms operating in the USA. These firms main product line is providing the Outsourcing of IT, which is mostly supported in a foreign Offshore nation.

For the business that these have not yet Outsourced Offshore, they must provide support here in the USA. For these firms, the majority of the hiring in the USA are of individuals who are on H1-B visas or L-1 Visa, and in most cases, are paid well below the standard pay that an comparable American would get.

The Offshore Outsourcers are motivated by the desire to support USA operations with offshore personnel which are “NOT” subject to Federal, State, Social Security, Medicare taxes. In order to be able to avoid paying the matching Social Security, Medicare and unemployment insurance many corporations have opened offshore subsidiaries or engaged proxies to do so for servicing USA based business, that if done within the USA, will be subject to all taxes. Not satisfied with the ill gotten savings obtained by illegal activities, now these “Prestigious Ones” are compounding the crime by a scheme to avoid paying Federal Income Tax.

The first step in the scheme is to create profits overseas (that is why the emphasis to transfer offshore as many jobs as possible).

The second step of the scheme is to bring back to the USA those profits without paying any Federal Income Taxes. The IRS rules allows the firms to defer paying Federal Income Tax on overseas profits till such a time as those profits are brought back to the USA. In order to evade this regulation the “Prestigious Ones” use the overseas profits to buy back the Corporation’s Stock with the overseas currencies and then the overseas suppliers pay for services with the Corporation Stock acquired from the overseas profits, in violation of the intent of the law and its regulations.

This places consultants which are USA persons at a tremendous disadvantage as any USA based operation has to pay all taxes.

The “End Clients” using the services of “The Prestigious Ones” have become victims of this scheme by being associated to such illegal activities.

Bill Gates VisionThe irony of this whole cost cutting effort by Outsourcing IT Jobs OffShore and/or using employees who are H1-B Visa or L-1 Visa holders, is that many times the cost of “Services” to the “End Client” is slightly effected. Between huge markups by some of the Larger Outsourcers and/or the combination of multiple layers of subcontractors involved in providing the IT Services with their respective markups, the cost to the “End Client” is still high. All the Offshoring of IT jobs and hiring of H-1Bs & L-1 Visa holders offer is higher profit margins for the Outsourcers…….WHILE PROVIDING LOWER QUALITY OF SERVICE TO THE END CLIENT!!! It is very true the old saying that Power corrupts and that Absolute Power absolutely corrupts. It is time for the Consultant and the End Client to bypass these “Prestigious Ones” which every day are looking more like ruffians and knaves.

We founded Peningo Systems to combat this problem of multiple layers of markups that ends up in between consultant and the end client.

Peningo’s solution to this problem is to bypass these “Offshore Outsourcers” and with the support of Peningo Systems Inc, contract directly between the Consultant and the End Client, thus, eliminating these ”Prestigious Ones” excessive Mark-ups and allowing for increased compensation for the Consultant while lowering the costs for the End Client.

To All Americans:

If you wish to voice your opinion, you are welcome in commenting to this post. If you wish to voice your opinion to a greater authority….Congress and/or your State Representatives, please go to the Peningo Advocacy Assistance Page.

About Peningo Systems:

Peningo Systems supports and provides Consultants with expertise in many areas including:

To see Peningo Systems areas of expertise, please go to the Peningo Technical Areas page.

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This entry was posted in Contract Direct to the End Client, H1-B Visa, H1B, Intellectual Property, IT Outsourcing, L1 Visa, Offshoring, Offshoring Intellectual Property, OffShoring Jobs is Tax Evasion, Outsource the Outsourcers, outsourcing, The Monopoly Game Applied To The IT Industry. Bookmark the permalink.

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