Ordinary Gweilo

The government is apparently thinking of bringing forward the start date for the concession on the domestic helper levy.  It’s often a mistake for a government to announce something too far in advance – the classic example being the abolition of dual mortgage tax relief by the UK government 20 years ago.  People rushed to buy before the deadline, prices shot up – and then fell dramatically, leaving many people with negative equity. 

Clearly this change is nothing like so dramatic, but it still creates opportunities for people to take advantage of the concession.  One option I hadn’t thought about is mentioned in an editorial in the SCMP today (Relief on maids levy must be fair to all – subscription required):

The arbitrary nature of the relief for employers leaves potential loopholes that can be exploited at the expense of helpers. Their representatives have raised fears that unscrupulous employers would terminate helpers’ contracts so they could sign new ones from September 1 without paying the levy, a tactic they could repeat before the suspension expires on August 31, 2010, in order to get another two years’ relief. The Department of Immigration is expected to announce more details of the new policy next week. The change needs to be seen to work fairly for both employers and their helpers. The government tacitly acknowledged this yesterday by suggesting that suspension of the levy could be brought forward.

Most employers will eventually receive some benefit – when they sign or re-sign a contract with a helper during the two-year period. But if the change had been thought through better, the government would have made the changes immediate and refunded employers on a pro-rata basis for the part of their helper’s contract that falls within the suspension period. This would ensure all employers are treated equally and none are tempted to break contracts or hold off on hiring in order to take advantage. It is not too late to make it that simple and transparently fair.

It can be made even simpler if they refund the levy on all current contracts (as of the announcement date).  I don’t see why there is any need to make a pro-rata calculation – the levy will have been paid for a two-year period and that is the length of the concession.  Employers who sign new contracts after the announcement won’t benefit, and the only case in which this would be unfair would be if an old contract had expired just before the date and a new one was signed just afterwards, but that would only affect a tiny number of people.    

However, I’m still puzzled that people seem not to realize that terminating a contract early means that you lose however much of the levy you have already paid.