India’s IT industry leaders have welcomed the end of double taxation in Australia and the introduction of work visas for Indian students after the two countries signed an extensive trade pact over the weekend.
According to experts, while the deal will benefit the IT services sector, the impact would be modest, given that these companies already have a significant presence in the country.
India-Australia trade agreement
In the India-Australia Economic Cooperation & Trade Agreement, Canberra agreed to end double taxation under which Indian IT services firms were taxed on the revenue for the work done in India. According to reports, this led to $1 billion loss for the sector over the last 10 years.
In addition, the agreement also enables automatic work visas for two-four years for Indian students and work and holiday visas for young professionals, which would help in talent mobility for IT firms, boosting trade.
Wipro chairman Rishad Premji tweeted, “Thank you so much to the Govt of India and to Nasscom for resolving the critical and long-standing Australia tax issue. The perseverance paid off!”
The pact is expected to double the bilateral trade to $45-50 billion over the next five years from $27 billion.
“The recognition on talent mobility with 4-year temporary work permits, spouses and dependent visas will enable enterprises in both countries to leverage the digital talent skills, build digital capabilities at scale and collaborate through innovative startups,” the IT industry body NASSCOM tweeted.
The Indian Brand Equity Foundation said in a report that the IT spend in Australia is $48 billion and India’s IT penetration in the country is 4 percent.
Over the last few years, Indian IT companies have started ramping up efforts in the country. However, given the significant presence the IT firms have in Australia, this deal would only have a limited impact on the sector, analysts said.
Modest impact
Infosys and Wipro employ more than 5,000 people across Australia and New Zealand. According to a report, HCL Tech employs 1,390 people. In terms of revenues, Asia-Pacific, which includes Australia, accounts for about 8-12 percent for the top IT firms.
Peter Bendor-Samuel, CEO, Everest Group, a research and advisory firm, said, “I believe this will only have a modest impact on an already vibrant trading relationship when it comes to professional services.”
Bendor-Samuel said the market for Indian IT was wide open before the agreement and Indian service providers such as Wipro already had substantial books of business in Australia. Some of the large Australian firms already have captives/GBS in India.
“A treaty such as this can only help as it raises the profile of India and the confidence to trade more, however, it will only add a little more fuel to an already hot fire,” he added.
A Bengaluru-based analyst, too, said that the impact of the treaty would be modest. “But where this will help hiring is Indian students in Australia,” the analyst added on condition of anonymity.
Australia didn’t have enough tech talent and the trade agreement offering two-four year work visas after graduation would provide readymade supply for the Indian IT firms, the analyst said.
Indians account for 21 percent of international students in Australia and according to reports, the community contributed close to $5 billion to the country’s economy in 2019-20.
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