Inflation has continued to soar in Vietnam during the last year. At the
beginning of March 2011, petrol prices jumped more than 17% and power
prices rose more than 15% on February 24, 2011. The consumer
price index rose at an annual rate of 12.24 % in February, the highest
rate of increase in the past two years. The local currency, the dong,
was also recently devalued and was under continued high depreciation
pressures, reported Vietnam newspapers.
Vietnam's
minimum wage
Vietnam adjusts its minimum wage every year. Currently, minimum pay
ranges from VND830,000 to VND1.55 million, depending on the location of
the employee. Vietnam, in 2011, is expected to lead the minimum wage
increase among the neighboring countries at an 11.5% rise.
(approximately 7% for Indonesia, Philippines, Thailand and 5.8% for
Malaysia. For more information, please read our "Asia Salary
Rises"). These increases in VIetnam are substantial but are less
than those in China where increases have been even higher this year.
Despite significant rises in the cost of living, the taxable income
threshold has been left unchanged at VND4 million (US$192) per month.
Tran Xoa, director of HCMC-based Minh Dang Quang Law Company, said that
the VND500,000 monthly salary cap for dependents should be raised to
VND1.5 million.
Post-Tet labour shortage
Many of Vietnamese workers have not returned after the year's biggest
holiday, Tet or Lunar New Year. Many labor-intensive factories are
facing the endemic problem of a post-Tet labor shortage. Even though
this has happened in the past several years, this year the
companies, especially labor intensive companies based in export
processing zones (EPZs) and industrial parks (IPs), that have the
largest number of workers quitting after Tet, are experiencing
this challenge. This is occurring even thought the company has
given their workers better living and working conditions, reported Tuoi
Tre news.
Statistics cited by a recent report in the Nguoi Lao Dong (The
Labourer) newspaper said that companies based in HCM City's EPZs and
IPs need to recruit around 10,000 workers after the holiday, mostly in
electronics, mechanics, garment and food processing sectors. The demand
for manual labor accounts for 60% of the post-festival recruitment and
the rest are workers with high professional skills, the report said. To
make up for the shortage of workers after Tet, many companies had made
plans to begin recruiting people immediately after the festival and
some began doing so even before the holiday. Many companies contacted
provincial authorities and agencies directly in the hope of recruiting
workers, especially in the central region that is the largest provider
of workers to HCM City.
The main reason for the lack of desire to return to work is that most
of the workers are looking for jobs in or near their home
towns. High inflation in recent years has resulted in an
increase in the cost of living in big cities, which makes it all the
more difficult for workers whose wages have not improved significantly;
therefore, the workers prefer to work in their home provinces or nearby
locations, where they might earn less but do not have to deal with high
living costs. Also, the last few years have seen a large number of
industrial parks established in agricultural provinces, creating jobs
for locals nearer to their homes and further reinforcing this change.
Personal Income Tax Issue
Recently, Vietnam economists have urged the government to amend the
Personal Income Tax Law as soon as possible, reported Thanh Nian news.
They believe that a new taxable income threshold should be calculated
against the minimum wage so that tax levels remain a fair and accurate
reflection of national earnings. However, in the current situation, a
tax exemption idea is also being suggested to the government.
Income earners are facing financial difficulties as prices are soaring
and it would help ease their burdens. Dr. Nguyen Van Thuan, Dean of the
Faculty of Accounting, Finance and Banking at Ho Chi Minh City Open
University, said that if the government is still worried that another
such temporary tax break would affect revenues for the state budget, it
could opt to reduce taxes by 50%
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