Imposition of expat tax



THE government has imposed new expat levy and expat dependant fee, which will increase every year to reach SR9,600 in 2020 for every expat working in a company where foreigners outnumber Saudis and SR8,400 for every expat working in a firm that employs foreigners equal to the number of Saudis while SR4,800 has to be paid by expats for every dependant.

The number of expatriate workers in the Kingdom’s private sector has reached 11.1 million while the number of their dependants crossed 2.2 million. As many as 1.8 million Saudis work in the private sector. The total amount of fees collected from expats and their dependants would reach SR115 billion by 2020, provided their number remains unchanged during this period.

At the same time the total fees collected from expats would amount to SR60 billion to SR80 billion as a result of the departure of a large number of foreign workers. The new taxes are in addition to the fees being paid by expats and their companies such as the fees for exit re-entry visa, work permit, resident permit or iqama, visas, housing allowance, electricity and water bill, energy and insurance.

The imposition of the new expat taxes coincides with the increase in fuel prices. Moreover, electricity bills for expats will be increased from five and 10 halalas per kilowatt to 37 halalas (which is the international rate), which is four times more than the present charge. We are talking about 2.5 million electricity meters at 2.5 million flats used by expat workers.

The move will weaken the purchasing power of Saudis as they would be spending part of their revenue on electricity and water bills, taxes and direct and indirect fees which they would have otherwise spent on the private sector. This will lead to many people leaving the private sector and prices of goods and services will go up.

Many expatriate workers are likely to leave the Kingdom as a result of new expat taxes while many others will remain in the country. It will also lead to excess workers wandering in the streets. The prices of services will go up and these illegal expats would find it a way to make money and make illegal remittances, until they are caught and deported to their respective countries.

All these scenarios are likely to take place and the situation would not be comfortable. Replacing expatriates with Saudis is a positive sign but it has affected the country’s ambitious development projects and increased prices of goods and services. This will lead to the appearance of illegal business activities such as selling goods and services from home, and affect the society’s behavior.

It would have been better to introduce new expat taxes gradually. This will help cancel such fees if found ineffective and unproductive. Correction of the present situation is required with caution. It is always better to conduct studies on new changes and charges before implementing them.

Everybody knows the huge volume of tasattur or illegal cover-up businesses in the Kingdom and it must be corrected but not at the expense of legal workers. The total cost of annual fees would reach SR70 billion and it would not be borne by expats because their remittances this year would not reach SR150 billion. Traders will not reduce their profits but will work hard to realize their usual profit.

The most likely possibility is citizens have to bear the new expat taxes in the form of increased prices of services and commodities and this would reduce their purchasing power. It will have a negative impact on the national economy as well as the home economy of citizens. The public coffers may receive SR70 billion when the number of expats becomes half. But if the number remains unchanged (which is impossible) the total amount of fees would reach SR110 billion.