The HIRE Act bill introduced in the U.S. Senate on 5 September 2025 seeks to penalise outsourcing through a 25 per cent excise tax and denial of tax deductibility for payments to foreign service providers. For India’s $280-billion IT, BPO and GCC ecosystem—dependent on the U.S. for over 60 per cent of revenues—this would sharply erode the cost advantage that underpins offshore delivery. Though still at an early legislative stage, the bill signals rising U.S. hostility to offshoring, and India’s tech sector must monitor it closely.
The new ‘Halting International Relocation of Employment (HIRE) Act’ bill, introduced in the U.S. Senate on 5 September 2025—if it becomes law—would pose a serious threat to India’s IT and BPO sector. With the United States accounting for more than 60 per cent of the industry’s revenues, the introduction of this bill has triggered unease across India’s $280-billion technology services ecosystem. For a sector built on offshore delivery and cost arbitrage, the proposed law strikes at the heart of its operating model.
It is essential to distinguish this legislation from the similarly named Hiring Incentives to Restore Employment (HIRE) Act of 2010, which was a post-financial-crisis stimulus package offering payroll tax holidays and retention credits to U.S. employers. The 2025 HIRE Act is entirely different—a new, standalone bill crafted to deter outsourcing by U.S. companies and shift work back onshore.
Key Proposals
Introduced in the U.S. Senate on September 5, 2025, by Senator Bernie Moreno (R-Ohio), the bill proposes a suite of aggressive anti-outsourcing provisions. The most far-reaching among them is a 25 per cent excise tax on payments that U.S. firms make to any “foreign person” for labour or services that ultimately benefit U.S. consumers, even if the services are performed entirely abroad.
In parallel, the bill seeks to deny tax deductibility for such payments, dramatically increasing the net cost of sourcing work from countries like India. It also introduces enhanced reporting requirements, forcing firms to disclose all “outsourcing payments” and exposing them to significant penalties for non-compliance. If enacted, these measures would apply to all relevant payments made on or after 31 December 2025, effectively beginning January 1, 2026.
For India, the implications are stark.
•A 25 per cent tax surcharge combined with loss of deductibility could make offshore delivery meaningfully more expensive for U.S. companies, prompting some to renegotiate contracts, rebalance delivery toward onshore or near-shore hubs, or slow down the pace of new outsourcing.
High-volume functions such as application maintenance, customer support, and back-office processing are particularly vulnerable. Even GCCs—captive centres that serve U.S. parent companies—may not be sheltered, as the proposed tax applies to any payment benefiting U.S. consumers, including internal cost allocations.
• Indian firms could face pressure to expand on-site U.S. staffing, accept margin compression, or accelerate a pivot toward higher-value digital, AI, cybersecurity, and consulting services.
• Meanwhile, uncertainty could chill new GCC investments at a time when India has become a global hub for such centres.
That said, the bill is at an early stage. It has only been introduced—without committee referral, hearings, or co-sponsors—and its passage is far from assured. U.S. technology and services companies are likely to lobby aggressively against measures that raise their operating costs.
Still, the political signal is unmistakable: Washington is re-examining the economics of offshoring. India’s IT sector would be wise to monitor the bill’s progress closely—and prepare for a world where U.S. outsourcing policy could turn structurally less favorable.
The writer is a former Indian Trade Services officer at the Ministry of Commerce; views are personal
