Businesses hide foreign workers to avoid tax

Many readymade garment factory owners hire foreign employees without complying with the legal procedures to evade taxes, say industry insiders.

The complicated process in arranging work permit for foreign citizens coupled with the tougher income tax law has pushed the businesses to go for this hiring process, they added.  

A foreign employee has to go through many hassles to get work permit from the Bangladesh Investment Development Authority.

According to the existing laws, a foreign employee must pay 30 percent tax on his or her income. They also have an obligation to spend 25 percent of their salaries in this country. 

If they conform to this law, they can only send home 45 percent of their salaries, seeking anonymity, a chief financial officer of a company said.  

To bypass the legal procedures, foreign workers come on tourist visa and work in RMG factories, he added.

As the country does not have local experts, the RMG sector employs foreigners to keep up with the latest fashion technology and automated machinery. 

According to the home ministry sources, a total of 85,486 people are employed in Bangladesh from 44 countries.

Talking to The Business Standard, Dr Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said, "Most of the industries like apparel, information technology, mobile phone, electronic need technical knowledge from foreign nations."

But, there is a legislative complexity in Bangladesh. That is why businesses are reluctant to follow proper procedures while appointing a foreigner.

"If we want to keep up with the high-tech industry, we should update our law or allow them for the time being."

The presence of foreign employees is helping grow technical skills of local staff. It also facilitates the transfer of technology, he added.

He mentioned that in some cases entrepreneurs are not happy with local employees' integrity. That is why, they fell safe to appoint a foreigner.

"We must focus on integrity from school level"

Requesting anonymity, a high official of a leading apparel manufacturing company, said "The industry has been facing a serious shortage of technical experts. That is why, entrepreneurs are forced to hire foreign nationals."

His company also employed some Sri Lankan and Indian personnel. They are working as industrial engineers and quality controllers.

If any company wants to introduce new products like suit, blazer, lingerie and sportswear, it faces a serious crisis of expert workers. 

Sharif Zahir, managing director of Ananta Apparel Ltd, said, "Our company is producing some high-value products such as suit, blazer and lingerie. When setting up factories for such products, hiring foreigners is a must.

"Local employees do not have the know-how and the experience required for the production of valued items."

"For example, the chief operating officer position requires the experience of at least 20 years. If a local employee can gain such level of experience, he/she prefers to turn into an entrepreneur instead of working in someone else's factory.

"We prefer local employees if they have the required experience as it is easier to communicate with them. We appointed around 25 foreigners, as we have no alternative. We employ Around 28,000 local employees and staff."

Preferring anonymity, a leading global fashion brand representative, said "Most foreigners are working in wrong positions like general production and management. Bangladesh does not need them for those positions."

"Rather the industry people should use foreigners in product development, design, efficiency. The country does not have the technical know-how in these areas."

The brand representative said, "Most employers believe that foreign staff members have a lower chance of getting involved in corruption. Foreigners are mainly working in the merchandising position."

"Most owners also lack sufficient understanding of the merchandising sector," the representative added.

Foreign employees in apparel industry

The Bangladesh Garment Manufacturers and Exporters Association has no accurate information on how many foreigners are working in the country's apparel industry.

According to a recent survey by the association, only 177 foreigners are working in the export-oriented apparel industry. However, the figure comes from only 52 out of 4,560 factories.

On April 29, the association issued a letter to its members asking them to provide information about their foreign workforce by May 10 this year, including their name, designation, age, job experience in foreign and Bangladeshi companies and monthly salaries.

Foreigners are working in the apparel industry mainly as merchandiser, technician, and also in research and development, sample development, production, quality control, maintenance, engineering and marketing.

Among them, around 48 percent comes from India, 25 percent from Sri Lanka, 13 per cent from China, 8 percent from South Korea, 1.7 percent from turkey and 1 percent from Pakistan.

Sources involved with the industry said a foreigner working in a garment factory makes $2,000 to $15,000 per month, depending on their skills and negotiation process.

Foreigners in mobile phone and motorcycle industries 

According to the Bangladesh Mobile Phone Manufacturers Association, the country has 11 mobile phone manufacturing factories who hire technical consultants from abroad due to the unavailability of qualified local people for this sector.

The same scenario prevails in the motorcycle industry. They also hire foreign technical experts.