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Contact Center Outsourcing Companies Misusing U.S. Taxpayer Funds

By Rajani Baburajan, TMCnet Contributor

Companies involved in contact center outsourcing are misusing U.S tax payer funds to train overseas call center workers.  This disturbing truth became a topic of public discussion when U.S. Representatives Tim Bishop (D-NY) and Walter Jones (R-NC) issued a letter to the United States Agency for International Development (USAID) inquiring about the agency’s involvement in the American taxpayer-funded training of overseas call center workers in the Philippines.

Following this, USAID announced the suspension of its participation in this program

The Communications Workers of America (CWA (News - Alert)) also expressed its concerns over this trend in the contact center outsourcing industry. The fact that U.S. tax payer dollars are being utilized to train overseas call center agents raises serious questions about the accountability of the officials especially as the domestic call center industry continues to shed jobs, losing over 500,000 since 2006 according to the Bureau of Labor Statistics. 

CWA argues that though USAID has announced the suspension of its participation in this program, a larger issue remains unresolved – how many U.S. corporations are benefiting from taxpayer subsidies of the call center jobs they have shipped overseas?  Are these same companies taking advantage of corporate tax subsidies and tax avoidance schemes while also taking advantage of U.S. taxpayers’ dollars at overseas call centers?

According to CWA, many corporations engaged in contact center outsourcing activities are engaged in creative tax dodging schemes. Despite these, these same companies rely on U.S. taxpayer money to subsidize the off-shoring of American jobs. This, according to CWA, is a particularly disturbing component of the revelations about the USAID participation in the Filipino training program.

“It’s bad enough that some of our largest corporations are soaking U.S. communities and taxpayers for generous financial incentives to locate in a community, only to leave local workers jobless when they eventually ship the call center jobs overseas,” said Ron Collins, chief of Staff for Communications Workers of America, in a statement.  “But it’s incredible to realize that these corporations are relying on taxpayer money to train foreign replacement workers – and that they’re avoiding basic tax obligations through complicated avoidance schemes in the process.”

The association highlights two major communications providers in the country -- Verizon and T-Mobile (News - Alert) USA-- as two examples to show how big fishes game American taxpayer through multiple channels.

Verizon, with more than $100 billion in annual revenues and nearly $15 billion in operating profits, is liable to pay substantial amount in taxes to federal, state and local governments.  However, the telecommunications major has found ways to evade tax at various levels, according to CWA.

At the federal level Verizon (News - Alert) uses tax avoidance techniques to bring its income tax rate down to a negative level so that it receives rebate payments from the treasury.  At the state and local levels, Verizon and its subsidiary Verizon Wireless (News - Alert) have frequently received economic development subsidies and challenged the assessed value of their facilities in order to lower property tax payments.

T-Mobile USA’s case, however, is different. Earlier this year, the company announced it is closing seven U.S. call centers, employing a total of 3,300 American workers.  In four of the seven communities where centers are slated to close, T-Mobile USA received millions in taxpayer dollars from state and local economic development subsidies. 

Meanwhile TMCnet recently reported the call center outsourcing industry is continuing to grow, with mounting success in India and the Philippines. According to a World Bank quarterly update, the Philippines portion of the report stated that job creation is expected to add 100,000 positions in 2012.