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Desi CAs pen US tax returns
November, 27th 2006
After doctors, lawyers and engineers, Indian CAs are troubleshooting for Americans now. Shortage of good accountants there is leading to outsourcing of tax returns to India. This year, 3.6 lakh US tax returns were prepared in India. And the numbers are growing. A study by ValueNotes, a Pune-based BPO consultancy firm, released this week predicts the numbers will grow to an estimated 1.6 million returns by 2011. And these are conservative figures. "The potential is much larger 22 million returns per year by 2011," says the report. Outsourcing of accounting and audit services is gaining strength every year. Business in India booms during the tax season. But unlike other services, which are mostly outsourced due to higher costs, the demand for returns offshoring is mainly due to lack of accountants and excessive workload. "Its seasonal in nature. Demand peaks during March- April and August-September every year," says Akshay Bhalla, founder director of Enablizer, a leading Indian accounting outsourcing firm. The number of CPAs (certified public accountants) and other qualified accountants in the US isnt enough to meet the demand. In fact, the demand-supply mismatch has led to severe competition for experienced accountants. Salaries are skyrocketing. Accountancy firms are discovering that offshored returns are not only turned around faster, but are 40-60% cheaper. Perhaps thats why other kinds of accounting work too are being offshored to India: book-keeping, financial statements analysis, etc. The industry will quickly move beyond. "Both vendors and buyers are at an inflection point on the maturity graph, and we expect tax returns preparation will drive penetration into a wider range of offshored professional accounting services," says Arun Jethmalani, CEO, ValueNotes. "There are about 1.3 lakh CAs in India and three times that number are in the pipeline. Also, we have an edge as we can train Indian CAs in US tax laws quickly," explains Bhalla. Indian accounting BPOs feel they have an advantage over corporate vendors as they speak the same language as CPA counterparts in US. The latter are bound to trust Indian CA firms more than tech companies because of their common accounting background. Adds Pratibha K, analyst, ValueNotes, "Facilitators like Xpitax and SurePrep are best positioned to service CPA firms, while Indian CA BPOs are well-placed to operate as complete back-offices for accounting firms." However, there are caveats. Indian vendors dont have enough team utilisation during the non-tax season. "They need to widen their range of services into other areas of accounting and spread to other geographies," says Bhalla. Theres also a growing unease in the US about availability of qualified talent in India to sustain current growth levels. Vendors might find it difficult to attract employees for tax preparation, which requires specialised knowledge. Also on the anvil is a new law in the US requiring written consent from end-clients for offshored returns, which could slow down growth. But till that happens, Indian CAs can look at overflowing bank accounts for sometime.
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