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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i


Palau Senate Considers Foreign Labor Tax Bill
Tax meant to encourage hiring of local workers

By Aurea Gerundio-Dizon

KOROR, Palau (Island Times, Jan. 24, 2013) – A bill establishing Foreign Labor Tax was introduced in the Senate Wednesday with the intent of encouraging employers to hire more locals instead of foreigners.

Senate Bill 9-8 proposes that Foreign Labor Tax be assessed monthly depending on the job classification.

The bill states that for non-resident workers employed as farmers, fishermen or domestic helpers, the employer shall pay $50 monthly for each worker. For all other foreign workers and foreign investors, the monthly tax shall be $100.

The Foreign Labor Tax shall not apply if the employer is a missionary or other religious institution, if the employee is a student or the employee is on vacation.

Section 1 of the bill disclosed that there is high percentage of unemployed Palauans. Employers reportedly tend to hire non-resident workers to fill positions that could be filled by Palauans because of cheap wages and low overall costs in employing foreigners. On the other hand, citizens migrate overseas in search of gainful employment and higher wages.

The bill states that foreign workers receive many untaxed benefits while in Palau, and many of them stay here even though they may lose their jobs.

By increasing the costs for employing foreign workers, it is anticipated that employers in Palau will be more encouraged to hire locals.

The bill also directs the director of the Bureau of Immigration to promulgate rules and regulations allowing for the modification of tourist visas to work visas to encourage employers to seek the appropriate visas for foreign workers.

The bill proposes that modification of visa shall be charged $250. If local employers employ foreign workers without work visa, they will be subject to a civil penalty of $10.00 for each day a foreign citizen is present in Palau without a work visa.

This bill was introduced by the Senate’s majority, including Senators Surangel S. Whipps, Jr., Hokkons Baules, Camsek Chin, Rukebai Inabo, Raynold Oilouch, Phillip Reklai, J. Uduch Sengebau Senior and Mason Whipps. It passed first reading and referred to the committee on Ways and Means and Financial Matters Committee, chaired by Whipps Jr., for review.

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