Malaysia Suspends Plan to Collect Foreign Worker Levy from Employers

Ray Sherman
Kuala Lumpur
170112-my-levy-620.jpg Workers are seen in the evening light as they work at a construction site in Kuala Lumpur, Dec. 30, 2015.

Reacting to criticism from employers, the Malaysian government has reversed itself by suspending for at least a year a new policy requiring businesses that hire millions of migrants to be taxed for each foreigner on their payrolls.

The policy of imposing an annual levy on businesses – which used to be deducted from migrants monthly salaries – was only 10 days old before the government decided to go back to the old policy temporarily.

Cabinet members on Wednesday decided to postpone the policy until Jan. 1, 2018, after receiving complaints from business owners and employers the previous day. The decision means that foreign workers will still have to pay the tax for now.

“The cabinet had a thorough discussion on the matter. Paul Low [minister in the Prime Minister’s Department] had an engagement session with stakeholders on Tuesday and presented the outcome at the cabinet meeting,” Transport Minister Liow Tiong Lai told The Star. “Taking into consideration the views of the stakeholders, we have found it wise to delay the implementation of the levy payment by employers.”

Malaysia’s Director General of Immigration, Mustafar Ali, confirmed the decision but declined to give details.

“The levy under the EMC has been postponed to 2018,” he told BenarNews.

The new Employer Mandatory Commitment (EMC), as the levy is known, would have required businesses to bear the annual levy for each foreign worker in their employ – 1,850 ringgit (U.S. $413) per worker in category one (manufacturing, construction and service industries) and 640 ringgit ($143) per worker in category two (plantation and agriculture).

The government expected to gain 2.5 billion ringgit ($558 million) from the levy each year under the new rule, according to Home Minister and Deputy Prime Minister Ahmad Zahid Hamidi.

Announcing the EMC on Dec. 31, Zahid said the move would require employers to ensure that their hired foreign workers did not abscond, change sectors, overstay their visits or become illegal immigrants.

‘Matters need to be thrashed out’

After  Zahid’s announcement, 159 local business associations sent a letter to Prime Minister Najib Razak complaining about the new policy, which took effect on Jan. 1.

Businesses welcomed this week’s reversal, Shamsuddin Bardan, executive director of the Malaysian Employers Federation (MEF), told BenarNews on Thursday.

He is calling for a thorough discussion with the minister in charge of the policy to avoid further disagreements.

“Definitely, EMC is a big issue and many matters need to be thrashed out, basically. All the industries and associations are calling for a discussion with the minister in charge of this, Paul Low, who was tasked to revamp the mechanism for the recruitment of foreign workers,” he said.

The return to the old policy will not affect at least one group of employers.

Mohamad Audong, the head of the Malayan Agricultural Producers Association (MAPA), said association members had been paying levies despite being given the opportunity to collect the money from workers.

Millions of foreign workers

Tens of thousands people from Bangladesh, Myanmar and other Asian countries have migrated to relatively more prosperous Malaysia in the hopes of making a living by often taking on grueling menial jobs. Malaysia’s foreign legal workforce is a little more than 2 million, but officials estimate that more than 1 million more are undocumented workers.

In November, Bangladesh’s minister for expatriate welfare and overseas employment announced that Malaysia would start recruiting Bangladeshi workers for construction, plantation and manufacturing jobs before the end of the year. Malaysian officials did not comment after the two-day meeting.

The announcement came months after the two countries signed a memorandum of understanding (MoU) in February 2016 that called for Malaysia to recruit as many as 1.5 million workers from Bangladesh over the next three years.

The MoU was short-lived. A day later, Malaysian officials announced a moratorium on all new migrant workers.

About 300,000 Bangladeshis work in Malaysia and send about 110 billion taka (U.S. $1.4 billion) back home every year, according to Bangladesh government figures.

Bangladeshi worker Mohammad Rakib, 44, expressed hope earlier this week when discussing the EMC. Rakib planned to send the money he pays for the levy to his family.

“This will definitely help with my eldest daughter’s higher education,” Rakib, a petrol pump attendant who has been working in Malaysia for five years, told BenarNews on Monday.


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