Indo-US talks resume on forging a Totalization pact.
By Sujeet Rajan
NEW YORK: After five years, the US and India are back to the negotiating table on the contentious issue of a Totalization pact, which would entail giving back social security contributions to Indian workers who work temporarily in the country, and then return back to India.
In all, four previous rounds of talks have taken place over a decade, with no results.
Indian professionals contribute more than $1 billion each year to the US social security system through taxes, and get no benefits from it if they were to return back to India. In all, it’s estimated that Indian professionals have contributed a total of $25 billion in social security taxes alone in the past decade.
Social Security is the largest social welfare program in the US, accounting for 37% of the government expenditure and 7% of GDP.
The Economic Times, which reported the new development, said a US government delegation met Indian embassy officials in Washington earlier this month. An Indian team will follow up on the talks with a visit to Washington next month.
The issue was also taken up during the trade policy forum meeting in November last year, co-chaired by commerce and industry minister Nirmala Sitharaman and her US counterpart Michael Froman.
The Times report, quoting an unnamed Indian government official, said the US have suggested a pact based on returning social security taxes collected from Indian workers who stay in the US for at least four-five years, before returning to their home country.
The US delegation also sought details of similar universal benefit schemes in India to decide on the course of negotiations, the report said.
The Indian delegation, however, rejected the proposal by the US delegation on minimum stay requirements. Instead, they have asked for social security contributions to be returned to all Indian citizens who return back to their home country.
The US has entered into a Totalization pact with 24 countries.
“Both India and the US have entered into similar agreements with countries including Denmark, Belgium, Germany and Canada, and there is no reason why such an agreement cannot be concluded between India and the US,” the Indian official was quoted as saying by the Times.
A pact to return social security taxes would be a big blow to the US given the large number of Indian professionals who work for short durations in the US.
If the pact does indeed come through, then the US would also be forced to take a hard look on how to reform the immigration system to induce skilled professionals from India to settle down permanently in the country, which would point to a more expedited way to push through Green Cards, primarily.
It’s also interesting that the US would offer to return back social security taxes to skilled workers who return back after 4-5 years. It is more than the length of time that an H-1B visa is granted for the initial period of three to four years. It’s likely that the US reckons that after that, not many Indians would want to return back to India, thus curbing the economic damage.
Anyway, a Totalization pact would be great for all professionals from India, who decide to settle here or not.