ASEAN countries stifle free labor market

By Vien Thong   August 25, 2016 | 02:47 am PT
Labor flow within the region is still subject to domestic rules in each member country.

The ASEAN Economic Community (AEC), a framework for the region's economic integration, focuses on a free labor market that allows skilled professionals to work anywhere they like across the region, which has a population of 620 million people.

The free labor market, which began to take shape in 2015, has freed up eight professions, including medicine, dentistry, nursing, engineering, architecture, natural resources and geographical exploration, accounting and tourism, allowing professionals in these areas to move between countries in the region to work.

ASEAN has about 300 million people of a working age, 70 percent of whom are from Indonesia, the Philippines and Vietnam.

Despite this vision of freer movement of labor, many ASEAN countries still impose requirements on companies that want to recruit foreigners in an attempt to protect their domestic labor forces from tough competition.

Experts said most member countries have built market barriers by tightening tax rules and immigration laws.

For instance, when employees apply for a work permit, they are required to have a sponsor who can confirm their employment offer. For employers, they have to prove that they can’t find qualified locals for the position.

“Even if you are in Malaysia for a day, you still have to apply for a work permit unless you can prove that you are in the country for a seminar or conference,” said Ang Weina, a tax advisor for Deloitte in Malaysia.

Foreigners also face higher tax rates than their local counterparts.

“During the first six months I worked in Malaysia, I had to pay up to 28 percent in income tax. After the first six months, if I had stayed there long enough, i.e. less than 14 days out of the country, the tax rate dropped to 11 percent based on my salary,” said Nguyen Hong Duc, a white collar worker in Malaysia.

About 60 percent of revenue from personal income tax that Ho Chi Minh City collects comes from foreign workers, said Tran Thi Le Nga, the city’s senior tax official, adding that foreigners working in Vietnam are subject to income tax rates ranging from 5 percent to 35 percent based on their salaries, while the rates for Vietnamese range from 5 to 30 percent.

ASEAN governments not only increase income tax rates levied on non-resident workers, they also tighten tax rules by imposing heavy fines for tax fraud.

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