The cost of doing business
While there has undoubtedly been widespread abuse with director’s licences to evade the employment permit system, the question arises if the new regulations that go into effect today do not amount to the good paying for the bad. After all, the changes are so far-reaching that they create quite an additional burden for businesses that need foreign directors.
The Lt. Governor is not a person to take that aspect lightly. He probably has enough proof that many so-called directors are in fact foreign workers for whom no employment permit has to be requested and the 500 to 700 applications for director’s licences per year is an indication in that direction.
No mention was made of consultations with the stakeholders, however, and considering the impact the measure may have on the business sector and investment climate, that might have been advisable. For one thing, investors may find the prospect of having to go through all that trouble to hire a director in whom they have confidence so unattractive that they are scared away.
Some might also argue that if the authorities are aware that such abuse is especially prevalent in certain sectors such as the Indian merchants, that is who should be targeted instead of making it that much harder for businesses that have legitimate need for a foreign director. The problem is that it can’t be done as long as the law allows such abuse, which is precisely why the new regulations have been introduced.
Nevertheless, looking at not just the requirements, but the documents needed to prove compliance, one would have to agree that the new system creates a considerable administrative burden for businesses involved, and more bureaucracy to deal with. That, while many already find it hard to do business here because of the employment permit situation, as recent articles written by business owners and others have again confirmed.
Requiring a minimum salary and private health insurance is one thing, but a home with a minimum rent of 2,250 guilders per month is quite another, especially if the person involved lives alone. By the same token, requiring a minimum turnover of 500,000 guilders of the company is also questionable, because there may be small companies that, because of the nature of their businesses, have greater need for foreign directors than bigger companies.
Time will tell, but at first glance the new regulations will put quite some pressure on the businesses involved and cost them a lot more time and money, also in terms of administrative cost. What that increase in the cost of doing business means in terms of the economy remains to be seen.
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