IMF slams Gulf States plan to tax expat remittances

Published:  26 Dec at 6 PM
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In an unequivocal Christmas Day message, the International Monetary Fund has warned about Gulf State plans to tax money transfers made by expatriate workers across the region.

According to the Arab Times, the IMF report states 90 per cent of private sector employees are workers from overseas, with implementing remittance taxes guaranteed to produce negative effects on the region’s economy. As the proposed five per cent tax represents only 0.3 of the Gulf region’s total income, economic benefits from the tax will be sparse, especially after admin costs are deducted, and overseas workers may well see the changes as an indication of the thin end of an anti-foreigner wedge.

Confusion over separate states’ intentions is likely, as Gulf Business reports Saudi Arabia is not intending to introduce the new tax in the immediate future. A senior official within the Saudi government is reported as saying the kingdom has no plans at present even although the initial Saudi proposal suggested six per cent taxes on first-year resident expats in the kingdom, dropping to two per cent after five years.

At the same time, other English language media outlets including the Arab Times are reporting last week’s Saudi budget statement contained a provision to claim monthly fees for dependents of working expats. The fee would start at 100 ryals per month, rising to 400 riyals by 2018 and 800 by 2020, although it’s as yet unclear whether the amount will be claimed for each dependent.

In addition, the fee waiver for businesses employing fewer foreigners than Saudi nationals will be cancelled, and the monthly charge for businesses employing mostly expats will be increased. To muddy the waters still further, the Saudi Minister of Finance announced expat workers from certain countries might well be exempt from the new fees, although he declined to state to which nationalities the exemptions might apply.

Apparently, the decisions will be taken later, and will depend on certain political, security and social considerations. Only one thing is sure, in that the attractiveness of the Gulf States for professional expatriates is likely to be much reduced once the new levies come into play.
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