Kuwait Lawmakers Pass Expat Remittance Tax

Kuwaiti lawmakers in committee have passed the controversial expat remittance tax.

In spite of warnings about its effect on the economy by the emirate’s central bank, a committee of lawmakers has approved the controversial expat tax on remittances outside the country. According to local media, the bill is expected to encourage expats to spend more money within Kuwait rather than sending it to their families in their home countries.

The vote, taken by the emirate’s financial and economic committee, was four to one in favour of the draft tax, which cannot be enacted unless approved by the National Assembly and ratified by the Kuwaiti government. If the tax becomes law, expat workers sending transfers of up to KD99 will pay one per cent, those transferring amounts between KD99 and 299 will be charged two per cent and those transferring between KD300-499 will pay three per cent. Expats sending amounts of over KD500 or more will be hit with a five per cent tax.

The fee will be collected by Kuwait’s central bank and passed over to the finance ministry, with those caught evading the tax by using the black market to be fined double the amount transferred as well as facing five years’ imprisonment. The bill itself had a hard time getting this far, with the first objection coming from the central bank governor, who stated its negative effects would far outweigh the increased revenues generated. Last January, another parliamentary committee also rejected it, and the government itself is aware that specifically targeting expats could breach the emirate’s constitution. The central bank’s president, Ahmad al Sarraf agrees, and the president of Kuwait’s Commercial Bank also believes the move would be bad for the economy.

According to Kuwait’s Constitution, taxes and public costs are based on social justice, meaning they cannot be imposed selectively. It’s also believed the move will spur a huge increase in black market operations as well as encouraging money-laundering and anti-terrorism financing. Honest expats will be forced to use Emirati citizens to make the transfers, at a cost to those wishing to send money back to their home countries. According to Ahmad al Sarraf, skilled expat professionals such as medical consultants can’t be expected to give of their expertise under these circumstances, and it’s impossible as yet to find fully-trained and experienced Kuwaitis to replace expat specialists relocating elsewhere.