The numbers just don’t add up

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I was at an Asian consulate last week and noticed throngs of people lined up. The consul general explained to me that this was the latest wave of expatriates who have decided to take advantage of the amnesty program for illegal aliens and leave the country without any repercussions. He told me that this time around, the processing of these expatriates was mainly concentrated on the dependents of expatriates whose residency status for some reason or the other was not up to par with the requirements set by the government of this country.

“It’s the dependent fee levy that has created this number of people, you know,” he continued. “Household heads have come to the conclusion that it is not economical to keep their families here as annually the fees per individual are going to increase, burdening the expatriate worker further. Better now rather than later is what most are telling the consular staff, as they prepare papers for their dependents’ departures.”

The Kingdom, the world’s largest exporter of oil, has launched an economic diversification plan and slashed state spending in an attempt to cope with a deficit resulting from the plummeting of crude oil prices, its main source of income. The ambitious Vision 2030 plan, unveiled in April 2016, aims to broaden the investment base and diversify the once oil-dependent economy. Vision 2030 has seen the country impose taxes, including value added taxes on goods, increase fees and charges, and set up new industries including arms manufacturing.

On July 1, expatriates working in the private sector began paying a family tax of SR100 per month for every minor or unemployed relative living in the Kingdom, the Saudi general directorate of passports said in a statement. The tax is expected to increase every year until 2020, when it will cap at SR4,800 per dependent annually. The finance ministry projects a government budget balance in 2020.

An estimated 11 million expatriates work in the Saudi private sector, with 2.3 million of their dependents based in the Kingdom, according to the Public Authority for Statistics. Spurred by this new tax or levy or whatever one chooses to call it, about 670,000 expat workers are expected to leave Saudi Arabia by 2020, a report prepared by Banque Saudi Fransi revealed. According to the report, some 165,000 expats are expected to leave the country every year. In addition, the report said that the new fees imposed on the companions of the workers would add about SR 75 billion to the budget over the next three years.

Now this is brushing the canvas with a broad paintbrush because it is obvious that with a shrinking expat population we cannot expect an increase in revenue through taxation. When an expat family leaves this country, many things happen. The money that is being earned and spent here is now being remitted outside. That money that has been used to vitalize the local economy through a multitude of channels and avenues has suddenly disappeared into a wire transfer to a distant land.

As Hussein M., a Saudi intellectual and an economist, says: “This projection of income is a heretical perversion in misguidance and misinformation. This huge income cannot happen, unless the Kingdom becomes a huge industrial complex that attracts local and international investments. That can only be achieved in a period of at least 10 years. That is why the taxation of the expat before we turn into a productive economy that depends on industry is like putting the cart in front of the horse. This is a sign of severe oversight in the economic consultants who run our country affairs.”

Indeed, with a calculator on hand if we begin to take stock of the numbers of departing expatriate dependents and the loss of revenue resulting from their exodus, the numbers just don’t add up.

The author can be reached at talmaeena@aol.com. Follow him on Twitter @talmaeena


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