Outlook Business Desk
A new bill, the Halting International Relocation of Employment Act (HIRE Act), has been tabled in the US Senate, targeting India’s IT services. It seeks to impose a 25% tax on payments American companies make to foreign service providers benefiting US consumers.
The HIRE Act targets “outsourcing payments,” which include fees, royalties, or service charges paid to foreign individuals or entities for work benefiting US consumers. The bill proposes a 25% tax, applying only to the portion of payments that directly supports American clients.
Republican Senator Bernie Moreno of Ohio, known for advocating domestic employment protection, says the bill aims to safeguard American college graduates and working-class citizens from job loss. Companies hiring foreign workers instead of Americans will face financial penalties, and the legislation targets profits gained by offshoring jobs overseas for cheaper wages.
The HIRE Act defines a “foreign person” as anyone who is not a US person. Corporations or partnerships organised under US possession laws are excluded. The Secretary of the Treasury has the authority to require reporting and filing of these payments to ensure companies comply with the bill.
The HIRE Act proposes the creation of the Domestic Workforce Fund within the US Treasury. This fund will collect revenue from the outsourcing tax, as well as penalties and additional taxes, to support programs aimed at workforce development and skill enhancement across the country.
The HIRE Act increases penalties for failing to pay the outsourcing tax from 0.5% to 50% per month, with no overall cap. Additionally, US taxpayers cannot deduct this tax from their income, significantly raising the financial impact on companies using foreign service providers.
If passed, the HIRE Act would apply to payments made after 31 December 2025. Indian IT companies will need to prepare for compliance and possible higher costs under the new US legislation.
India’s IT services sector may faced significant risk as more than half of its software exports, around $225 billion in 2024–25, come from the US. If the HIRE Act becomes law, these services could become costlier for American clients, creating potential challenges for Indian IT companies.
Far-right US commentator Jack Posobiec called for tariffs on all foreign remote workers, saying countries should pay for providing services to the US just like goods. His post was shared by US President Donald Trump’s trade advisor, Peter Navarro, highlighting growing scrutiny on outsourcing.