Saudi shura: no taxes on expats

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 saidAccording 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.