Taxing expats under spotlight


FEATURED NEWS ARTICLE:

The long pending issue of imposing income tax on foreigners would come up again for discussion at the Shoura Council on Sunday. The finance committee of the Shoura has recommended carrying out fresh studies on imposing tax on all foreigners working in both public and private sectors in the Kingdom, Al-Riyadh newspaper reported yesterday.

"Zakat is not a tax levied by a government, nor is it a voluntary contribution. It is first and foremost a duty enjoined by God and hence a form of worship."

The new proposal was made by Muhammad Al-Quwaihes, member of the Shoura, who presented it as an additional recommendation attached to the annual report of the Department of Zakat and Income Tax, which had already been discussed by the Shoura.

According to Al-Quwaihes, levying income tax on foreigners would be helpful in further boosting the ongoing Saudization drive. “Foreigners working in the Kingdom transfer about SR100 billion to their countries of origin annually.

The government is neither levying a single riyal in tax or Zakat on their remittance nor do they need to pay any kind of taxes,” he said.

Al-Quwaihes noted that most of the countries in the world impose income tax on individuals who work and earn money in those countries. “It is high time to impose income tax on foreigners. It is also to be noted that foreign workers are beneficiaries of all government support and subsidies given to utility services and products such as water, electricity, wheat, and petroleum products,” he said.

Nearly a decade ago, the Shoura Council reviewed the possibility of imposing taxes on foreign workers but later the proposal was put on the shelf. There are eight million foreigners in the Kingdom, an overwhelming majority of them working in the private sector.

Both Saudi and expatriate employees working in the Kingdom had to pay income tax until it was abolished in 1975. Later, there were moves to reintroduce income tax on foreigners in late 80s. However, in 1988, King Fahd scrapped the plans.

At present, only Saudi citizens and Saudi companies need to pay Zakat of 2.5 percent annually on profits and on the assessable amount for individuals, in addition to a 45 percent tax on foreign investors.

In a bid to attract more foreign investment into the Kingdom, the government slashed, in 2004, the tax rate imposed on foreign investors from 45 to 20 percent.

By RIYADH: ARAB NEWS

Published: Mar 30, 2012 23:56 Updated: Mar 30, 2012 23:56

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2 comments on “Taxing expats under spotlight

  1. Shoura votes down plan to tax expats

    Saudi Gazette: 2 April 2012

    RIYADH — The Shoura (Consultative) Council Sunday rejected a proposal to study the long pending issue of imposing income tax on foreign workers in the Kingdom. A majority of members voted ‘ayes’ to put down the proposal after it was put to vote following heated discussions.

    The rejection of the proposal, made by Muhammad Al-Quwaihes, member of the Shoura Council, would definitely be a cause of cheer for about nine million expatriates in the Kingdom.

    Participating in the debate, several members said the proposal was untenable at this stage due to the Kingdom’s development requirements in different sectors and specializations.

    Those supporting the proposal contended that taxing the expatriate workers would narrow the gap between their salaries and the wages of Saudis and thus increasing job opportunities for Saudi workers in the private sector, Dr Muhammad Bin Abdullah Al-Ghamdi, Secretary General of the Council said after the meeting.

    According to Al-Quwaihes, levying income tax on foreigners would be helpful in further boosting the ongoing Saudization drive. But, some members did not see the Saudization process getting any worthwhile impetus from the proposed measure.

    Expatriates account for nine out of 10 private sector jobs in the Kingdom. They fill roles that range from domestic service and factory work to management positions in large finance companies.

    The value of their remittances has increased in the past five years from an officially recorded SR15.3 billion in late 2006.

    The true figures for money outflows were probably much higher because they did not include informal transfers.

    Way back in January 2003, the Shoura Council rejected plans to impose income tax on expatriate workers whose salaries exceed SR3,000 per month.
    The Council then decided that it was inappropriate to levy taxes on the salaries of non-Saudis regardless of the amount of their pay.

    As regards the issue of collecting Zakat on plots of land meant for commercial purposes, Al-Ghamdi said the Council decided to wait for the the outcome of a study on the subject by a sub-committee.

    In the day’s another business, the Shoura approved two draft memorandums of understanding on strategic dialogue between the GCC member states and Pakistan and Australia.

    The Council also listened to the views of its Housing, Water and Public Services Committee on the annual report of Al-Ahsa Drainage and Irrigation Authority for the fiscal year 1431-32H.

    The Council completed discussions on a report of the Committee of Security Affairs on the proposed draft rules of the Saudi Commission for Academic Accreditation and Assessment. — SG/SPA __

  2. Shoura: No taxes on expats

    By RIYADH: ABDUL HANNAN TAGO

    Published: Apr 2, 2012 01:15 Updated: Apr 2, 2012 01:15

    The Shoura Council rejected a move to tax the incomes of individual expatriate workers in the public and private sectors at its 18th regular session yesterday.

    The session was chaired by Council Vice President Dr. Mohammed bin Amin Jafri.

    Secretary-General of the Shoura Council Dr. Mohammed Al-Ghamdi said the council made the decision after hearing the arguments for and against the proposal.

    He added that since proponents of the move could not attain the requisite majority in the house to secure approval, it was rejected. He said the Kingdom is implementing a number of developmental projects in various sectors that need professional skills.

    Supporters felt if approved, the proposal would have helped bridge the gap between the wages of Saudis and non-Saudis and increased the chances for locals to work in the private sector. Al-Ghamdi clarified the proposal had been submitted some time ago.

    News that the debate on the issue had been revived had drawn criticism from the expatriate community, especially low-paid workers.

    According to a local newspaper, the finance committee of the Shoura Council has recommended carrying out fresh studies on the possibility of imposing tax on all foreigners working in both the public and private sectors in the Kingdom.

    The source said the new proposal was made by council member Muhammad Al-Quwaihes, who presented it as an additional recommendation attached to the annual report of the Department of Zakat and Income Tax that had already been discussed by the house.

    “The government is neither levying a single riyal in tax or Zakat on foreign workers remittances, nor do they need to pay any kind of taxes,” Al-Quwaihes said.

    An expatriate, Sauda Salem, expressed dismay at the possibility foreign workers may have to pay income tax.

    “It is a great shock for all expats who are not managers or making good money,” he said.

    As most foreigners are unable to meet their expenses, their wives try to support them by working small jobs, he added

    “I request them to reconsider the plan of taxing expats only to support Saudization,” he suggested.

    Another expat, Mohammad Nazeer, claimed expatriates would be happy to contribute to the Saudi economy by paying income tax on their salaries and bonuses, adding they were very grateful for the generous tax-free salaries and benefits enjoyed in Saudi Arabia.

    Another worker, Tanveer Ahmad, was willing to pay Zakat as long as the money went to the needy.

    “As a Muslim, in order to make my earnings fully Halal, I should pay 2.5 percent of my earnings toward Zakat. I do pay it, but only in my native country where there are needy people. I have no objection to paying Zakat here if the government makes sure it goes to the needy,” he said

    According to Shoura member, Al-Quwaihes, levying an income tax on foreigners would boost the ongoing Saudization drive. “Foreigners working in the Kingdom transfer about SR100 billion to their countries of origin annually,” he said.

    Al-Quwaihes noted most countries in the world impose income taxes on individuals who work and earn money in those countries.

    “It is high time we impose income tax on foreigners. It is also to be noted that foreign workers are beneficiaries of all government support and subsidies on utility services and products such as water, electricity, wheat, and petroleum products,” he said.

    Nearly a decade ago, the Shoura Council reviewed the possibility of imposing taxes on foreign workers but later the proposal was shelved.

    There are 8 million foreigners in the Kingdom, an overwhelming majority of them in the private sector.

    For another expatriate, Dr. Victoria Charlston, imposing taxes on foreigners would mean the job market would instantly lose many of its Western professionals.

    “Financial reward is pretty much the only reason why Westerners decide to spend a stint of their working lives in KSA. There is little other reason or incentive. Let’s hope that KSA will have enough of its own educated, highly trained manpower who will fill the gap if expatriates leave.”

    She said taxing non-Westerners earning low salaries for their hard labor was akin to daylight robbery.

    “They have so few rights compared to their fellow countrymen who happen to live and work in other countries around the globe, and to tax them would be another nail in their coffin,” she said.

    “Should taxes be imposed on all foreigners, and this term in itself is laughable as many so-called foreigners are third and fourth generation citizens who would long ago have enjoyed equal rights to citizens should they have settled elsewhere in the world, then they should immediately and justly be afforded similar status to KSA nationals.

    “Furthermore, to repeatedly discuss and question in newspaper columns these workers’ rights to send their hard earned money to their relatives overseas is quite frankly a disgrace. Their money is simply the fruit of their labor, to dispose of as they wish.

    “They have not been lazily sitting on their backsides waiting for money to be deposited in their bank accounts, as many of KSA’s youngsters do. When one makes the decision to work in KSA, one immediately has to give up certain aspects of life that would be enjoyed in one’s homeland. This sacrifice is offset by a rewarding salary.”

    Both Saudi and expatriate employees working in the Kingdom had to pay income tax until it was abolished in 1975. Later, there were moves to reintroduce income tax on foreigners in the late 80s. However, in 1988, King Fahd scrapped the plans.

    At present, only Saudi citizens and Saudi companies need to pay Zakat of 2.5 percent annually on profits and on the assessable amount for individuals, in addition to a tax on foreign investors. In a bid to attract more foreign investment into the Kingdom, the government slashed in 2004 the tax rate imposed on foreign investors from 45 to 20 percent.

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