Hanoi curbs expatriate employment
BANGKOK - Foreign businesses in Vietnam have expressed dismay at a decision by Hanoi to limit the number of expatriates employed by local companies to 3 per cent of an operation's total workforce.
The decree, intended to force foreign companies to employ more Vietnamese managers, comes as the National Assembly rebuffed a proposal to ease tax that businesses say makes hiring educated Vietnamese workers too expensive.
The decisions point to the type of regulatory and policy obstacles that still deter foreign investment in communist-ruled Vietnam despite its large, young and motivated workforce. "Even when the technocrats understand problems and undertake to fix them, they don't always succeed in the face of all the vested interests," said Fred Burke, an attorney for Baker & McKenzie.
Vietnam's foreign business community has long called for a cut in heavy income tax on high-earning Vietnamese, which they say has deterred them from hiring more local white-collar workers.
Currently, Vietnamese citizens who earn over $200 a month pay 50 per cent income tax, plus 22 per cent for social insurance and health schemes. If their monthly salary exceeds $800, they must pay a 30 per cent tax surcharge.
The result is that a Vietnamese employee who takes home $2,000 each month can cost a company nearly $6,000, an expense that has prompted many multinational companies in Vietnam to fill management ranks with foreigners, who are not liable for so many taxes.
But while Vietnam's finance ministry pledged to steer an income tax reduction through the National Assembly, legislators have so far declined to put it on their agenda. "People who earn $800 a month are viewed as extremely high income earners, and the residual socialist thinking is to tax that away," said Tony Foster, a lawyer with Freshfields.
Hanoi may not be able to enforce its new decree, which lawyers say would be inconsistent with its aspiration to join the World Trade Organisation.
But the conflict is unlikely to go away.
"They'd get more tax if they let growth lead the way rather than trying to squeeze more blood out of the existing turnips," said Mr Burke.
By Amy Kazmin - The Financial Times - September 30, 2003.
|