Employment Agencies Hit With Taxes

By AUNG THET WINE / RANGOON Friday, July 4, 2008

Employment agencies in Rangoon have been hit with new measures aimed at curtailing the industry’s notorious tax-dodging schemes, according to members of the city’s business community.

Economic hardship, rising commodity prices and high unemployment in the country force many Burmese to look overseas for jobs. In recent years, many employment agencies that can offer work abroad have become lucrative businesses and, as a result, more agencies have sprung up around the country, a Rangoon businessman said.

In 2007, there were 70 employment agencies operating under licenses from the Ministry of Labor. However, this year, more than 40 more agencies have been issued licenses.

In order to evade taxes, many of the agencies have, in the past, run two sets of accounts— one for the authorities showing their business making a loss, and one for themselves with a true balance of accounts, an employment agent from Rangoon said.

The agencies have to cheat in order to evade the high taxes imposed on them and the large amount they have to pay in bribes to corrupt officials, he said.
Under the Burmese military regime, no consistent policy on tax codes has been put in place, and rates have fluctuated year to year depending on budgetary demands. Businesses operated by close relatives or cronies of the generals can often evade taxes entirely, members of the business community in Rangoon said.

“Even among the employment agencies, the companies owned by senior government officials or operated by their close relatives can evade taxes, while others have to pay millions of kyat a year in taxation. Nobody wants to pay these taxes,” the manager of a job agency in Kyauktada Township said.

“I am willing to pay tax,” he said. “But these extra taxes are unjust and a burden to us. They make it very difficult for us to run our businesses. We have to kowtow to senior officers from the Labor Ministry, calling them a ba (senior uncle), and bribing them,” he added.

On June 6, the Department of Labor Management in Naypyidaw issued a new directive stating that employment agencies which send less than 300 workers abroad annually will not get their licenses extended.

“The Labor Ministry sent a directive to licensed employment agencies stating that each agency must account for 300 workers sent abroad,” the Rangoon employment agent said. “Most agencies are able to make that quota, but they are reluctant to show this amount on their books as they will be burdened with taxes and other levies. It’s a Catch-22 situation.”

An employment agency officer in Tamwe Township called it a “dilemma,” adding that if he were to submit his true accounts, we would have to pay an excessive amount in taxes.

“But if we don't submit our full figures, our license may not be extended,” he said.
Apart from annual licenses to extend, employment agencies must submit 5 million kyat (more than US $4,000) to the Labor Ministry as a deposit when opening for business and millions of kyat in kickbacks thereafter, he added.

“While I applied for a license, I had to pay almost 20 million kyat (more than $16,500),” another agent said. “Then I have to extend it annually and must bribe these officials all over again. It’s a vicious circle.”

In addition, each agency must pay 50,000 kyat ($42) to the Labor Ministry for every worker they send abroad, the agents said.

Of course, the costs inevitable get passed down to the workers themselves.
The employment agencies in Rangoon that spoke to The Irrawaddy said that they take a fee equivalent to between $650 and $1,500 from a worker to find him or her a job in Malaysia , and around $1,690 to $2,000 for fixing a Burmese worker with a general job in Singapore . For more advanced positions, such as an engineer who wants to work in Singapore , a payment of between $2,650 and $3,675 is demanded. Burmese workers who take jobs in the United Arab Emirates pay around $800 to the agencies, say the sources.