Saudi plan to tax expats creates unease

Expatriates in Saudi Arabia and their Saudi employers alike voiced unease about a proposal the government is studying to impose income tax on foreign workers to make up for falling oil revenues.

Around a third of the 30 million inhabitants of the world’s top oil exporter are foreigners, many of them drawn, despite ultra-conservative social restrictions, by the absence of tax and the lure of salaries higher than they could secure at home.

A National Transformation Plan of economic reforms, released on Monday, said 150 million riyals ($40 million) had been set aside for preparing and implementing tax on expats, but Finance Minister Ibrahim Alassaf said no decision had yet been taken.

Radical labour reforms

Still, the news that such a proposal was being formally studied by the government was enough to alarm some foreign workers.

No further details have been released on what such a tax might entail for residents — a category that includes all non-Saudi citizens. Among the unanswered questions: whether it would cover all income levels and all professions, or how long it would take to introduce.

The collapse in oil prices after mid-2014 has pushed Saudi Arabia to contemplate a radical overhaul of all parts of its economy, including new taxes, privatisations, a changed investment strategy and sharp cuts in government spending.

However, the new Saudi reform plans depend partly on strong private sector growth, already fragile thanks to lower state expenditure and cuts to energy subsidies, and which could be further weakened if labour costs were to rise.

The government wants to get more Saudi nationals into private sector jobs instead of working in well-paid but marginally productive roles for the government, something that labour reforms since 2011 have already tried to achieve.

Increasing the cost of foreign workers through the imposition of an income tax will help make locals more competitive hires. Labour Minister Mufrej al-Haqbani said on Tuesday that Saudi Arabia had no desire to reduce the number of expatriates in the kingdom, who now number about 9 million, saying their presence was “very important”.

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Printable version | Apr 16, 2021 8:51:52 PM |

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