Non-EPZ firms can pay foreign staffers in dollars

The government is going to allow firms outside of the Export Processing Zone (EPZ) to pay their foreign employees in dollars. This has been a long-standing demand of companies and would make the revenue board better able to tax the foreigners.

The approval will enable the export oriented non-EPZ companies to pay the foreign employees via their foreign currency (FC) accounts from the company export retention quota (ERQ) account. The central bank will issue a circular in this regard this week.

People concerned said the government is going to take the decision for two main reasons. These are that foreigners shy away from the non-EPZ companies as they pay salaries in local currency and in cash; plus payments in local currency and cash-in-hand deter the National Board of Revenue (NBR) from taxing the foreign staffers.                  

Factories currently located in the EPZs can pay their foreign workers via FC accounts while firms outside the EPZ have to pay salaries in taka, an official of the Bangladesh Bank's Foreign Exchange Policy Department told The Business Standard.

The official said this makes many foreign workers less interested in working for non-EPZ companies. The initiative has been undertaken to create equal opportunities for foreign workers both at EPZ and non-EPZ factories.

Industry people said many countries including Japan, China and India are now showing interest in investments at the Special Economic Zones (SEZs).

They said the new investments will employ a large number of foreign workers. If the salaries are paid in Bangladeshi currency, it will be difficult to get skilled foreign nationals for the production units. Therefore, both the domestic and foreign investors have been asking for the foreign currency payment facility for a long time.

Meanwhile, revenue board officials said salary payment in foreign currency to FC accounts will help bring the foreign workers in Bangladesh under the tax net. Foreigners have to send money from Bangladesh to their home countries often through hundi (an illegal non-banking channel) since they are paid in local currency. Salary to FC accounts will lessen their harassment in sending remittances to their home countries.

Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) Vice-President, and former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Siddiqur Rahman praised the move.

"Foreign staffers at non-EPZ factories have to convert their salaries into dollars to send it home as the employers still pay them in taka. This creates many hassles. Due to this, many foreign skilled workers are not interested in non-EPZ companies," he told The Business Standard.

A large number of buying house officials are foreigners. Apart from this, many foreigners work at export-oriented companies–including apparel manufacturing units.   

Siddiqur said the companies often have to pay the foreign employees more due to the obligation of payment in local currency. "If there is an opportunity to pay them in foreign currency, the employers will be able to hire foreign workers at a lower rate," he said.

However, Word Bank's former lead economist Dr Zahid Hussain said the decision should have been taken earlier. 

He said the country still has a shortage of skilled manpower in various sectors. In these cases, export-oriented companies have to rely on foreign workers. The decision is realistic to make foreigners interested in joining factories even outside of the EPZs.

Dr Zahid Hussain said that the EPZ Act will not apply to Special Economic Zones (SEZs). Foreign investors are interested in the SEZs including the Bangabandhu Industrial City in Mirsarai, Chattogram and Araihazar Japanese Economic Zone in Narayanganj. The foreign investors were concerned as it is difficult to invest if there are too many obstacles. 

He said that the fact is not that Bangladesh is saving foreign currency by paying the staffers in taka as the foreigners use to buy dollars with the local currency. Since there is no point in paying them in taka, such restrictions are of no use except to complicate the investments.

According to a report published by Transparency International Bangladesh (TIB) in February, 2.50 lakh foreign nationals are working in the country. Of the total foreign workers, 90,000 are legally employed.