Economists call for flexibility in collection of expat levy

Economists call for flexibility in collection of expat levy

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Economists call for flexibility in collection of expat levy

DAMMAM – Economists and businessmen have suggested developing a flexible mechanism for the collection of additional fees to be imposed on private establishments that employ foreign workers and the levy on the workers’ dependents living in the Kingdom, Makkah daily reported.

The fees will be scaled upward annually starting next year, according to announcements made by the government.

The authorities have announced plans to levy a monthly fee of SR100 for each dependent of expatriate workers from the middle of this year. This fee will increase to SR400 per head by 2020.

The government will also impose a monthly fee of SR400 on every foreign worker, which will eventually be raised to SR800.

The businessmen argue that the payment of fees to more than one entity is confusing. They say a system of monthly payments will be suitable for workers on long-term contracts while annual payments are suitable for employees on short-term contracts.

Member of the Saudi Society of Accountants Abdullah Al-Barrak said paying fees on a monthly basis is relatively better, as it will be in the form of premiums taken from the salary and will not have a cumulative effect on the financial situation of the workers.

He pointed out that the amount would be similar to social security deductions and therefore does not need additional staff for the collection of payments because the operations will be carried out electronically.

He pointed out that a system of annual payments might violate some of the rights of the companies and workers in case they were laid off for some reasons.

“Many small enterprises do not strictly apply the contract system for employees and they operate in a highly competitive environment that will make their position vulnerable if they are asked to pay lump sum amounts or to lay off workers. Some companies will have already been pushed out of the market by the time the fees hit the maximum limit in 2020,” said Al-Barrak.

Chairman of the Land Transportation Committee at Sharqiya Chamber Bandar Al-Jabri said adding the newly announced labor levy to the existing fees will definitely affect the survival of many companies.

He said pointed out that lump sum payments will be ideal for workers on short-term contracts while a monthly payment plan will be more feasible for employees working on long-term bases.

Al-Jabri pointed out that contractors bidding for projects would take the new fees into account when quoting their prices, which carry some risks especially with the likely increase in prices of goods and services.

Committee member Mohammad Al-Yami said contractors who pay the fees annually would not gain anything compared to those who make monthly payments. The system will contribute to a reduction in foreign labor, which in turn will increase the burden on consumers in many areas.

However, Al-Yami noted that companies waiting for the mechanisms for the payments hoped that the application of the new fees would resolve the problems of obtaining necessary visas to recruit workers.

1 COMMENT

  1. The basic of any economic activity is make available product and service at lower cost. Expats here as the business community seek cheap and effective labor force for providing product and service at low cost. Countries try to protect their citizen by imposing tax but excessive tax will result un efficient production and service thus price hike. This will not be beneficent for the citizen in long term.

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