Fees on expatriates

Fees on expatriates

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Yousuf Al-Muhaimeed

By Yousuf Al-Muhaimeed
Al-Jazirah

THE general budget for the fiscal year 2020 targets to generate about SR65 billion in revenues annually through fees levied on expatriate workers and their dependents, according to foreign consultancy firms that formulated these plans.

The imposition of the fees on dependents will start by the middle of this year and the fees imposed on every expatriate worker will go up to SR400 a month from early next year and will culminate in SR800 a month after three years.

The projected revenues from these fees will begin with SR1 billion this year, will go up to SR24 billion next year and to SR44 billion in the year after and so forth.

This theoretical presentation seems logical considering the current number of expatriates in the country. But a valid question rises here: Will the number of the expatriates remain the same in the coming years?

Will the businessmen and industrialists just sit aside and watch what is going on without doing anything?

Are they going to retain all their expatriate workers by paying the fees or will they gradually retrench workers to cut costs?

This is exactly what is happening these days. Many companies have already started reducing the number of their expatriate workers. They did this either through reducing their production or closing some factories that make little or marginal profits.

Therefore the supposition that SR65 billion could be collected annually after three years from fees imposed on expatriates is fictitious because it is based on the present number of the expatriates in the Saudi labor market. This number is something that cannot be guaranteed.

The same applies to the fees on the dependents of expatriates. Many of them may decide to keep their families back home to avoid paying the hefty fees. This also undermines the accuracy of the projected revenues from fees to be collected from expatriates for their dependents.

The matter that raises more questions is the possible reaction of Saudi businessmen and industrialists regarding these measures.

They have two options: relieve their workers gradually and reduce their commercial activities, which is definitely going to hurt the economy, or hike the prices of goods and services.

At the end of the day, it will be the citizen, and no one else, who will be indirectly bearing the consequences of the fees imposed on expatriates and their families. This is the expected result and exactly this was what happened in many other countries that resorted to heavy taxation to raise revenues.

It will be the poor consumer who will at the end bear the fees to be imposed on merchants. The citizen is a small wall over which anyone can jump.

The natural outcome of this will be economic recession, which is likely to hit a number of manufacturing and service sectors because of people’s purchasing power will be greatly diminished.

All these possibilities should be taken into account when imposing fees on expatriate workers and their dependents. It is therefore significant that these fees be reviewed if we want to go forward toward more development and prosperity.

49 COMMENTS

  1. This article seems to reflect the thoughts of common expatriates & the dilemma faced by manufacturing & service segment. Let’s hope that the negative impacts would be marginalized by some sustainable initiatives that would be positive for the economy.

  2. Finally, someone was brave enough to bring forward the real facts about fictious calculations and un realistic measures to boost economy….

  3. A very good analys, many companies reduce the number of staff, and as I noticed there is more then 80% expatriates children complete Thiere higher education in home country or westren countries. And using the family status facility they just renew resident perments every year. After imposing fee they will cancel it. And survival with family for up to 7000 sr salary holders will be difficult.

  4. Excellent article, takes into consideration possibilities and assumptions. In the end, economy will suffer in the long run.

  5. These regulations show they dont have mind…most people will send their families back rather paying this amount bcz a person having 4 to 5 dependants can not afford this cruelty in the name of fee..

  6. You nailed it Sir Yousuf… Hat’s off to you. Saudi Government must make decision like Chess Masters, they should consider all pros and cons before moving a piece.

  7. A very nice analysis by Yousuf Al-Muhaimeed
    The negative effect of this decision is already on the way. Families are seriously thinking to move to their home countries, children are being withdrawn from schools.

  8. Expat families are already spending their money here instead of sending it on their own country. So, why these idea came about?

  9. Well the problem is that currently recession is already hitting expatriates hard so that expats was thinking to go back to their home countries but now with this newly imposed fees expats have decided to go back when their iqama expires.When you have less or no income how will you pay the fees and it will not only effect expats it will also hit companies hard.Everyone knows that getting profit is hard nowa days so the result of this newly imposed fees will be zero or negative.Imposing this fees with good economy can bring positive results but if the economy is good not like current economy in which expats are facing salary delays of nearly 5 to 6 months or left unpaid.Think about the image of a top muslim country in which mostly expats are unpaid or have no job left on mercy of Allah. This is the thinking of a common expat worker.

  10. upon hearing the news about the fees on expat dependents i immediately decided to let my dependents go back home and after a year i may leave too. the cost of living is just unbearable. raise in apartment rental, upcoming price hike of fuel, electricity, and now monthly fees on expat…the best thing to do pack and go.

  11. A very sensible article. I always enjoy reading Yusuf’s write ups. Hope the beloved King Salman would provide some relief to the expat community by reducing these taxes.

  12. Well, a year back i sent my family back to my home country, because i couldn’t afford the school fee for my three kids which is increased every year without a reason,
    this year i have cancelled their iqama’s because of the increased exit and re entry visa, and besides i will not be able to afford the dependent fee for my four kids and my wife, which is another additional burden
    now what next ??????

    very obvious i will also pack up and leave…..

  13. Expats working in Middle East have enjoyed untaxed income for along time.They don’t pay taxes in their home states on the income from Middle East .If an American works in Middle East ,he has to pay tax in USA and the state he is domicile.They are receiving services free in both countries.ie .Defence ,Health,transportation,etc .Middle east country’s national income (oil revenue)belong to their citizens.

  14. Brave analysis. I am working in university and living with family. May be next year i am also planning to send my family back to native country 😢

  15. Good article. The company who have made the budget is on figures, without considering the social-economic consideration. Approximately, 80% of the expats earn less than 5000 SAR per month. In my personal opinion, Saudi Arabia can only progress when cheap labour concept is abolished. At the moment, Saudis are forced to hire due to regulations as they are costly.

    Consider a coffee maker works 12 hours, 6 days a week at a salary of 1500 SAR while Saudi will cost minimum 3000 SAR not considering the working hours. So, how can a business can go for costly option.

    The above is my opinion and everyone has rights to agree or disagree. However, putting fees is not the way forward.

  16. Even the exorbitant rise imposed on visit visas would be hugely detrimental to varied business interests. Rather govt should have formulated expatriate friendly policies in order to retain the expats earning and spending.

  17. Only international indian school jeddah already received about 2000 TC application by the end this academic year!!! people decided to go!

  18. Allah knows sooner or later all these analytical forecasts are going to happen because it’s based on basic economics rules.
    On contrary ground feedback is indicating same.

  19. Your voice is heard! Wisdom is shown in this article! This is what we fear will happen, exactly as you have mentioned. Housing/Apartment Businesses, Schools, Food/Restaurant Businesses, Grocery Stores, even the malls will be affected – because the only reason why we frequent these establishments is because we have families here. We will not spend our salaries here, instead we will send most of it back to our home countries. We are planning to send them home asap, which would mean less business here, more money going out.

  20. Many expatriates have their children studying in their respective countries for which they have to pay SR 1200 for exit reentry for a year plus the Insurance fees around SR 2400 if she is a girl child. They come Saudi for just 15 days to renew the Iqama and return back. Those families will definitely send their children on Exit by which again the government will lose more money. It will be a heavy burden on the expatriate with family. They might loose the experienced people as well.

  21. The KSA Government will benefit in this expatriates fees in both ways. If the Number of Expats remain same they will get the fees for managing the Budget. If the number of Expats are reduced the Government will save money of SUBSIDIES on food and services.

  22. The apartment I stay in Khobar was in good demand for years. It had never fallen vacant max 1 week.
    Now 3 houses are vacant past 3-4 months… no one even coming to see..!!

  23. Great article and exceptional analysis. Now, its time to reconsider and think more carefully about such fees and look for better alternative process for the benefit of everyone.

  24. Those families will definitely send their children on Exit by which again the government will lose more money. It will be a heavy burden on the expatriate with family. They might loose the experienced people as well.
    This is what we fear will happen, exactly as you have mentioned. Real estate Businesses, Schools, Food/Restaurant Businesses, Grocery Stores, even the malls will be affected – because the only reason why we frequent these establishments is because we have families here. We will not spend our salaries here, instead we will send most of it back to our home countries.

  25. Well crafted article !

    Although iam not against imposing fees or any taxes on expatriates living in the country, But I would certainly emphasize on reviewing the to-be implemented policy and its extreme repercussions. Expatriate living in the country spends their earnings on hospitals, education @ schools, house rents, groceries and much more. This in turn benefits the locals in the form of regular incomes via rents, private sector earnings etc. But with the new fees to be imposed on expat & their dependents; along with growing fees exponentially every year the scenario would surely change as the expatriate will choose alternatives than to over burden themselves further & this will surely hurt the already challenged economy in all the areas. In fact, the jeopardy caused by this implementation will be far more than expected in such case. In eastern province, at least a few thousand expats have applied for their school going children’s “TC” in order to send their family’s back home for good. Many flats in Jubail and other parts of the eastern province are already vacant in wake of this to-be implemented policy. I hope the consequences are weighed well along with a fine grained analysis prior implementing this policy.

    Best,
    Green Meadow.

  26. with the announcement of dependents Iqama fee, > 10,000 expat students submitted the application for TC only in Riyadh, due to unaffordable financial burden of their parents.
    just imagine what will happen at the end..!

  27. Excellent article, as rightly mentioned the economy is further going to shrink as many expatriates either leave the country or sending their family back home, leaving a big dent in the already suffering housing market, retail and service sectors, which are mostly owned by the Saudi Nationals. Moreover, people will be very reluctant to do any investments under this circumstances. In fact, the best way would be to encourage domestic consumption by attracting expatriates and tourists and increasing the industrial outputs. Many other countries in the world are successfully doing this practice. Saudi can also capitalise on its enormous tourism opportunities (both religious and family tourism considering it’s vast God-gifted natural beauty and history) and impose some tourism and service taxes to generate revenue for the Govt, rather than increasing the Visa fees.

  28. Very well written based on ground realities. In the year 1984 KSA had witnessed the similar situation, what is mentioned by the Author.

  29. Good article. It will affect citizen in particular.
    Most expatriates will leave their family in home country for good. This will effect the rented housing more vacant and less expenditure from the expat as he will repatriate his major portion of the salary.
    Services,Projects will increase their overheads cost due to focus on local hiring, training and cost.
    All these makes checks and balances equal. The end result will not met.

  30. Strategic and very rational! Yes, the imposition of fees on expats will backfire. Let’s face it large segment of expats, particularly representing skilled workforce (middle income group) will send their families home or worse case may leave the Gulf. Let’s take the case of Indians, who represent the largest foreign workforce segment. The Modi led government in India is creating immense transformation and reforms; all of which is speedily transforming India in to the next economic giant in the world. The nation is already rated by Global Rating Agencies as the most ideal investment destination for investors globally. Such positive transformations are already providing indicators – of demand for skilled and non-skilled workforce locally; as well as an increase in wages. Similarly progress is also occurring in the Philippines under President Rodrigo Duterte. So the strategy to use expats as the ONLY means to earn revenue or support the general budget will never work! The strategy to levy fee on expats will never produce the desire results, on the contrary the will certainly hamper even harm the local GCC market environment. For e.g. expats, particularly expats living with their families spend most of their salaries on education, healthcare, rents and purchase of consumer products/services, all of which has a beneficial impact on the local markets. However, the local market will face a certain blow because large numbers of expat are sure to leave for greener pastures or back home to their motherland where speedy developments are occurring.

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