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KSA considers expatriate income tax

Reports indicate that an income tax of 2.5% will be levied on expatriates earning more than SR3000 per month, but will it happen and what are the motives?

The question of an expatriate income tax is back on the agenda in Saudi Arabia after comments made by Dr Hmoud Al Badr, secretary general of the Shoura Council. He told Saudi Press Agency that the income tax will be levied on those earning more than SR3000 ($800) per month.

The idea of the expatriate income tax was first mooted by Dr Ibrahim Al Assaf, minister of finance and national economy, around one month ago. Since then, analysts have been predicting that a rate of 2.5% will be imposed.

The motives behind the proposed tax are unclear: is it designed to discourage more foreign workers from moving to the Kingdom, does it aim purely to boost government revenues, or both?

Financial analysts in the Kingdom told ITP.net that a rate of 2.5% would probably do little to discourage Westerners used to basic tax rates of 25-30% in their home countries. Plus, at 2.5% of income, the amount collected would do little to dent the Kingdom’s long term budget deficit of SR630 billion.

Analysts also say this is not the first time the idea of an income tax has been discussed. One banker recalls the issue being talked of at least twice before, but the government decided in the end not to follow through.

Could things be different this time round? After all, localising the private sector workforce and reducing the budget deficit are amongst the government’s key domestic policy objectives right now.

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