Money transfers spike 25% – Remittance tax seen harmful

April 8, 2018

Senior officials of the local exchange companies have warned of the negative and possibly catastrophic repercussions on the economy and the reputation of Kuwait if a tax is imposed on the remittances of expatriates.

The officials stressed it will create a permanent black market in the country since the vast majority of expatriate funds are out of the financial system.

During a visit to the local exchange companies to find out to what extent the crisis may affect Kuwait, which aspires in the coming period to become a financial and economic center, it was discovered the country will have to fight the black market and several other issues in addition to it, this will damage the reputation of the country.

Economic expert Mohammed Ramadan explained the decline in oil prices usually draws the attention to other sources of income, including remittances as an important source of income, especially that the GCC accounts for more than 20% of the total remittances in the world and this he said is illogical.

Kuwait, for example, is importing goods worth 3 times the value of remittances so it is not permissible to ask the exporter for a certain percentage of the value of exports or to impose certain fees on him.

The same applies to the expatriate who collects his money through a certain number of working hours, so they cannot be asked for a fee or tax, Ramadan told the daily.

Ramadan stressed imposing a fee on expatriates or imposing a certain percentage tax on the amount is contrary to international norms, especially since expatriates do not have the right to own property in Kuwait like many countries and there is no suitable environment to bring the family. Therefore, the expatriates are under obligation to provide money for the family back home.

So instead of putting tax on remittances, there are better ways of making an expatriate spend the money in Kuwait, such as by providing him entertainment facilities and services and open the door for families of expatriates to live in the country instead of putting obstacles in their way. This way they will be able to spend their money in the country they live.

Ramadan added, the imposition of tax on the remittances will lead to the creation of a black market and the international experience is proof of that, especially as it affected the economy and income of these countries in a clear negative way.

This practice will also dent Kuwait’s relations with the labor-exporting countries to a great extent and violate the World Bank and IMF recommendations to reduce fees on remittances as much as possible. Ramadan pointed out, the implementation of the tax will lead to an increase in prices of goods and services and will lead to increased infl

ation. He pointed out the discrimination between the citizen and the expatriate will make the citizen a source of remittances, which will cause the state to lose revenues that may go in the pocket of the citizen instead of benefiting from it. The tax was rejected in the UAE and Oman as they are inconsistent with international agreements, Ramadan said.