Impose tax on remittances, Kuwaiti MP urges

 

Kuwaiti MP Safa Al Hashem said she was adamant that a tax be imposed on remittances by expatriates.

The tax will be between three and five per cent and will thus take into consideration the differences between the foreigners with low income, such as drivers and domestic helpers, and the others who usually make high remittances, she said.

Al Hashem, the only woman in the 50-member parliament, has been spreading a movement by lawmakers to press for taxing remittances, arguing that it would limit the amount of cash transferred out of the country to re-invest it in the local economy and would allow for extra revenues for the state.

Last week, the governor of Kuwait’s central bank said he did not support the proposal.

“The bank does not support taxes on remittances because their negative impact on the overall economy is far greater than the expected income,” Mohammad Al Hashel said.

“The remittance figures being circulated in the media are exaggerated. We must take into consideration that the imposition of such a tax entails operational and administrative costs and expatriates will most likely resort to other channels to transfer their money to their home countries in a bid to avoid paying the extra fees.”

However, Al Hashem, on Sunday, rejected the governor’s statement.

“The statement by the governor of the Central Bank is purely political and is part of the policy of courtesy pursued by the government. He was wrong when he said the tax would not constitute a source of income,” she said in remarks carried by Kuwaiti daily Al Anba.

“In fact, it is exactly the opposite. The remittances by expatriates are $14 billion and the imposition of taxes of three to five per cent will mean that 0.03 per cent of the value of the remittances will constitute an additional income for the state.”

Al Hashem claimed that some Gulf countries have imposed a six per cent tax on remittances.

“It is normal that some money exchangers would be unhappy about the tax on remittances because it would mean less money gained for them. As for the claim that the tax would create a parallel or a black market, the government, the Central Bank and the Ministry of Finance have to assume their responsibilities and ensure a tight monitoring and control of the situation,” she said.

Lawmakers who opposed the proposal to introduce a tax on remittances assailed as “nonsensical” and argued that it would have negative impacts on both Kuwaitis and foreigners and would exacerbate negative sentiment within the community.

“We do understand the significance of discussing the issue of high numbers of foreigners living in Kuwait and the negative effects on the country’s demographics, but we cannot tolerate making life harder and economically more challenging for expatriates who have been legally recruited nor do we accept threatening them every now and them with deportation,” the lawmakers said.

MP Mohammad Al Hayef said imposing taxes on remittances was a violation of Islamic principles.

“In Islam, people who earn money are requested to contribute 2.5 per cent of their income to the community under the pillar of Zakat,” he said.

“However, Zakat is an annual duty while remittances can be made every month. Therefore, it is not acceptable from a religious perspective. At the same time, we have to appreciate that it is not fair to impose taxes on people who leave their country and live away from their family to make money and then they are asked to pay taxes on their remittances. We really need to be cautious because by imposing such a tax, we might be opening a window for money smuggling,” he said.

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