Finally - Voices of Reason.... IMF puts the brakes on the plan

To continue the "Squeeze the Expat Till they Leave" theme, taxation of remittances (taxing money to be sent back to your home country) has become another big issue lately. 

So today I saw an article that had a voice of reason in it.  People are starting to wake up to how truly stupid some of these negative policies are - and by saying that, I mean stupid for Kuwait, its economy, its reputation and its people. 

It will - and is - having a boomerang effect.  Look at the real estate market:  tanking.  It seems like Kuwait is struggling with its identity (again?).  On the one hand, there is a desire for inbound tourism and being an international financial hub.  On the other, there is a very distinct desire to leave Kuwait for Kuwaitis.  Both sides have a valid argument (one locked in the stone ages);  but realistically, only one can win out (and I don't see how kicking expats out or making their lives harder will help the country).

Sidebar:  I commented on Facebook (related to the Bidoon issue) recently and someone wrote back, "Don't be a hypocrite.  I've seen your comments and how you talk bad about Kuwaitis."  Completely irrelevant to the Bidoon issue, regardless, but I wanted to note that I love Kuwait and Kuwaiti people (for the most part).  I love Americans and the American people (for the most part).  I think there is good and bad in every society.  What I comment on is politics and/or negative changes (again this is my perspective) taking place in Kuwait.  I'm not here to trash anyone for being from a particular country, of a particular color or sexual orientation or religion or anything else.  Please don't be offended/git yer panties in a bunch.  

Ok, so on to the article.  Kuwait has for YEARS been trying to obtain an international trade agreement with the US [Trade Agreement Act (TAA) compliance through World Trade Organization].  Kuwait Vision 2035 makes reference to steps on how Kuwait plans to accomplish this.  (I don't believe that discriminatory practices against foreign workers in Kuwait is mentioned.  You can check it for yourself.)  "These objectives are sought to be attained by promoting open and liberal trade both of Kuwait and its trading partners, by following the principles and rules of the WTO and by entering into mutually advantageous arrangements directed to the elimination or substantial reduction of tariffs and other barriers to trade and to the elimination of discriminatory treatment in international trade relations."

Of note, if any Kuwait company offering products wants to get onto the US Government's procurement system (also known as the General Services Administration - GSA Schedule), they are SOL as Kuwait is not a TAA compliant country.  Ooops.  Why?  Last I heard there was an issue of ensuring enforcement of licensing of software.  I'm sure there are other issues.  Info about Kuwait and WTO HERE.

So with all the yackety-yack about taxing foreign worker remittances from Kuwait (which sounded like a faaaaaabulous way for Kuwait to make some extra dinars); the International Monetary Fund has stepped in and said, "Yo, you guys aren't playing by the rules."

I am SURE that the story below will come as a huge blow to one particular xenophobic MP; a highly educated economist who (one would think) should know better about economics!

And this (finally) is what the article says:

Kuwait cannot impose remittance tax on expats – Ownership rights better than taxation

Arab Times, KUWAIT CITY, March 29: Kuwait cannot impose tax on the remittances of expatriates because it is a member of international financial organizations and has signed agreements for establishing those organizations which require commitment from all members to abide by the relevant regulations that include avoiding restrictions on the current payments, reports Al-Anba daily.

According to Article 8 of the agreement for establishing International Monetary Fund (IMF), it is not allowed for any member country to take discriminating procedures in terms of currency exchange or participation in activities that result in multiplicity of currency prices.

In the explanatory memo, IMF stated that if the difference between the buying price and selling price of currency exceeds two percent, approval of IMF is required.

It is worth mentioning that the relevant parliamentary committee announced the preparation of a proposal to impose four percent tax on the remittances of expatriates.

According to experts, this proposal contradicts the vision of turning Kuwait into an international financial hub.

It will force efficient expatriate workers to leave, especially with the loss of the benefit of working in countries that do not impose such tax and since most of the workers in the GCC countries receive low income.

Researcher Mohammad Ramadan said the tax will bring about more harm than benefits. He highlighted the experience of the United Arab Emirates in creating investment opportunities for expatriates to invest their money, stressing that such a step will be more profitable for the state instead of imposing taxes. Ramadan indicated that imposing such a tax will leave expatriates with no choice but to search for other ways to send their money, even through illegal methods. He added that allowing expatriates to own real estate in Kuwait is a good way of taking advantage of their money.

Meanwhile, experts stressed that Germany has about 19 million immigrant employees, and the average amount remitted annually by them is about $ 5 billion. On the other hand, Kuwait has about three million expatriates but they remit about $15 billion per year.

According to IMF, the maximum revenues expected from imposing this tax are about 0.3 percent of the total national revenues of Kuwait, which is $4 billion. This amount is very less compared to the amount required to bring about the required economic reform.  

(DG:  a mere drop in the bucket.  Imagine how much Kuwait would earn from people who could buy homes, bring their families, and inject money back into the local economy?  As it stands now, expats are leaving Kuwait in droves as things are getting very uncomfortable.)

And from another story

“Meanwhile, legal advisor at Kuwait Human Rights Society Abdul-Rahman Al-Ghanim indicated that Kuwait is a signatory to international conventions against all forms of discrimination. He wondered how the Parliament could think of imposing taxes on expatriates alone, excluding the citizens. He argued that imposing tax on expatriates’ remittances contravenes the human rights convention in one way or another.

Another expert in legal affairs, Dr Muhammad Al-Ahmad, stressed that the Kuwaiti Constitution does not permit discrimination between humans living on this land.

He cited Article 29 of the Constitution which stipulates: “All people are equal in human dignity and in public rights and duties before the law, without distinction to race, origin, language, or religion.” He also cited Article 24 of the Constitution which states that “social justice shall be the basis of taxes and public imposts.” He affirmed that any legislation which violates the Constitution will never see the light, warning against putting more pressure on the foreign labor force.