Saudi Arabia's move to impose a tax on expat remittances has raised serious concerns among the Indian workers there. There are reports that the economic affairs committee of the Shura Council of the Kingdom would consider the proposal to impose two to six percent tax on foreign workers' remittances to their home country.

 

The tax on remittances was first mooted by former Shura Council member Husam Al Angari.  

 

If the economic affairs committee of the Shura Council gives a green signal to the proposal, there are high chances that it would become legal. The general assembly of the council is expected to hold a discussion on the proposed tax next week.  

 

Angari was quoted as saying that the aim was to encourage foreign nationals to invest more in the Kingdom. The money collected through the tax would be invested in Saudi Monetary Authority. There are also reports that the Kingdom was weighing the options of imposing a tab on the money an expat could keep when he/she makes a final exit. 


Expats’ remittances 
 2004: $15.1 billion 
2013:  $36 billion  
IMF calculates the annual remittances to $84.4 billion 

There were reports that other Gulf countries are also mulling tax on expat remittances. 
 

The International Monetary Fund (IMF) had warned the Gulf countries against imposing the tax as it would negatively impact the economy. Foreigners make up 80 to 90 percent of the work forces in these countries and the tax would hit the GDP of the region, the IMF pointed out. Besides this, the tax would incur more administrative and operational costs, directly hitting the private sector.  
 

A report of the Labour Ministry of Saudi Arabia had found that foreigners occupied 70 percent of the workforce in the private sector.  Indians constitute 20 percent of the labour force. 

The Foreign workforce in Saudi Arabia: 
70% of private sector. 
Agriculture sector: 70% 
Construction industry: 60%
Service sector: 63%  
Indian presence: 20% of total workforce in private sector.
 

The IMF predicted that imposing the tax on income and remittances would make the Gulf countries less appealing to the foreign workers and they would look for other countries.