What if a tax is imposed on the money remitted by expatriates? I know this is scary for many expats here, but this issue has seen heated debates in a number of Gulf states, some of which seem logical and others weak. The demands do not specify how the country will benefit from the collected monies. The most important question is who are the targeted categories? Not all expats are alike. Are they targeting big contactors, traders, doctors, engineers and judges, or simple laborers that barely make ends meet? This is really a worthwhile question.
Kuwait ranks second in the world after the UAE over migrant workers’ remittances abroad in relation to GDP. Expats in Kuwait sent $12 billion in the past year to their home countries. A study reported that expatriates in the Gulf Cooperation Council (GCC) remitted $100 billion to their home countries in 2014, which is twice the amount transferred in 2010. This is indeed a lot of money!
Some are demanding the imposition of income tax on expatriates, and although there have been no official voices to support any suggestions to make income tax a reality in the Gulf states so far, this is an issue worth talking about. Expatriates, who are the majority in most Gulf countries including Kuwait, reject such a proposal regardless of its reasons or legitimacy.
Taxes are the right of the state, which is undeniable, but identifying the categories to be taxed is important. I understand expats view Gulf states as tax-free areas, which is an attractive point for expats. On the other hand, as a Kuwaiti, if I buy property in the US for example, I will be obliged to pay all taxes. This is the country’s right.
In order to have a fair income tax regime for expats, we must have a comprehensive tax system to support government spending on public services and improving infrastructure projects, as is the case in all countries of the world. Tax proposals must come with a wide-ranging change of residence regulations, citizenship and investment laws. For example, if an expat buys property, he/she should be eligible for free residency or citizenship in five or ten years. Then we will find many expats gladly saving their money here to buy a house for themselves and their families. Also, investors would welcome this opportunity to invest in an appropriate environment.
This issue is like a double-edged sword that needs to be steered properly towards the right category of people, otherwise it’s going to hurt limited-income expats.