KUWAIT: Turning the screw on foreign workers?

Further penalties look certain for Kuwait’s increasingly unappreciated foreign workforce who want to send their money back home

A parliamentary committee in Kuwait has approved a draft law to tax foreign remittances despite warnings from the country’s central bank.

The financial and economic affairs committee voted four to one in favour of the draft law, which can only become regulation if approved by the wider National Assembly and accepted by the government.

The bill states that foreign workers would be taxed on their money transfers abroad, on top of normal commissions and charges by banks and exchange houses, based on the amount sent.

Transfers of up to KD99 ($330) would be taxed at 1 per cent, transfers of KD100-299 ($334-$997) at 2 per cent and transfers of KD300-499 ($1,001-$1,664) at 3 per cent. Those of KD500 ($1678) and above would be taxed at 5 per cent. Transactions related to investment protection would be exempt.

The rapporteur of the committee, MP Saleh Ashour, said that the tax would be collected by central bank and paid to the finance ministry, according to the country’s state news agency KUNA. Those found to have breached the law by engaging in black market transfers would face fines of double the amount transferred not exceeding KD10,000 ($33,000) and a jail sentence of up to five years.

The bill is one of several targeting the country’s foreign population proposed by MPs over the last year including large fees for driving licences and work term limits.

In May, the governor of the country’s central bank Mohammad Al Hashel said the organisation did not support a tax on remittances because the negative impact on the economy would be greater than the increased revenues it would generate. Ashour said the bill aimed to encourage expats, which make up around 70 per cent of the country’s 4.5 million population, to spend their money in Kuwait.

However, Committee head Salah Khorshid said the government had expressed reservations towards the draft law because it only applied to foreign workers and not citizens. A government proposal to also tax citizens for transfers was rejected by the committee. Khorshid said foreign workers remitted KD19bn ($63.3bn) out of the country over the last five years.

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