From 3rd to 1st World: The ills of the construction industry

I met up with my old army buddies the other day. The usual “what are u doing now” and the “where are u working” stuff. Another one chipped, still in construction? Another guy added, your industry is one which sells “Man-Year” like nobody’s business.

I was like, huh, yah….how you know. Everyone chorus that everybody knows. It was like an open secret. Gee…even those in other sectors also know. The construction industry really sucks, I thought to myself.

Another buddy added that he had just sold his construction business and is washing his hands off this industry that has taken much of his time…day and night, 24/7. While yakking about how nice it was to leave this industry…he gave us a lowdown on how low some contractors would stoop to… it was on how they would systematically cheat on their workers and oops, taxes.

Let’s draw this picture:
A contractor employing 30 foreign workers and 10 local “phantom” workers. Their total staff strength in the books would be 40.

Let’s say the contractor made (Net terms) a profit of two million dollars. It has to pay income tax which may amount to some S$400,000 or more. Foreign labour is cheap…the contractor probably enjoys a substantial benefit from there. They probably pay their foreign workers, a salary range of between S$400 to S$600 per month.

It is common knowledge that workers’ passports are being held by the contractor. The foreign workers have a FIN number. This card will be used by the contractor to apply for a password, needed for online transactions such as income tax filing, etc.

An errant contractor would use their FIN number and passwords to file tax their tax returns online. While the foreign workers are paid between S$400 to S$600 a month, the contractor could file online tax returns with their salaries as between S$1500 to S$1900 per month. For 30 workers, the salary expenditure shown can be an additional S$400,000 dollars or more, than what is actually paid to them. Plus another S$100,000 dollars put in as expenditure is claimed for medical expenses, those “non-existent” holiday travels to back home, overtime allowances, etc.

At the onset, the contractor would open bank savings accounts for their workers. Pretty common for their passbooks and ATM cards to be kept by the contractor. The company credits the monthly salary of S$1,900 dollars into their bank account and withdraws them using the ATM cards. The workers are then paid their actual salary of some S$600 in cash monthly.

He added that the contractor would make a bundle in tax savings with this method. All the worker levies and CPF contributions for the local “phantom” workers it paid out to the Government is more than offset by the income tax savings from this bright idea.

At the end of the day, the contractor got super cheap foreign labour, saves a bundle on taxes, and virtually employs “phantom” Singaporeans at a token amount of say, S$$60 per month.

Wonderful picture, the contractor got cheap labour and tax savings. It was no wonder that foreign labour is much welcomed to inject those savings on income tax and further down, “leasing” them out to other companies at S$60 or more a day as contract labour.

In retrospect, I think my previous employer might have done that. That creep didn’t pay my CPF and salaries and closed down his business. I remember seeing him zapping around town with his new beemers then. Real MF.