Boo hoo....
FEAR REMITTANCE TAX
MAY DENT KUWAIT HUB HOPES – DECLINE IN REMITTANCES
Levy may dampen
investment interest – Bill seen to risk international reputation
Arab Times
KUWAIT CITY, April 4: The government is determined in its
stance to reject the parliamentary bill to levy the remittances of expatriates
even though it was approved by the Parliament’s Finance Committee last Sunday.
According to sources, the government expressed concern over
the impacts of such a move on the goal to transform Kuwait into a financial and
commercial hub.
There is a need to study the matter from all angles related
to application and procedures, and the changes it will bring about.
The stance of the government, particularly of Ministry of
Finance and the Central Bank of Kuwait, is based on seven factors. They are:
- Taxes weaken the financial stability of the state
- The
law poses risks to Kuwait’s international reputation
- It
weakens the ability of Kuwait to combat money laundering
- Controlling the emergence and growth of black market in the banking sector will
be difficult
- Controlling the movement of remittances from the banking sector will be
difficult
- It
will directly impact the operations aimed at attracting foreign investments
- The
mechanism for applying taxes and the relevant work processes in the banks to
carry out the deduction process during the remittances are not clear
The sources explained that the government of Kuwait is keen
about working on transforming Kuwait into a financial and commercial hub
through the launch of major developmental projects with the aim of attracting
foreign investors and improving the status of Kuwait.
However, the adoption of the bill to levy the remittances of
expatriates could negatively affect the fulfillment of this goal.
Decline in remittances
The remittances of expatriates in 2017 reached a total of KD 4.1 billion.
However, compared to the remittances worth KD 4.56 billion sent in 2016, 2017
registered a decline of ten percent.
In 2014, the remittances sent were a total of KD 5.1
billion, which was the highest in seven years, in line with a record increase
in the oil prices.
The remittances of expatriates from Kuwait equal nearly ten
percent of the local revenues and exceed one-third of the total revenues of
Kuwait.
In the last two years, the remittances of expatriates in
Kuwait recorded a huge fluctuation. During the third quarter of last year, the
remittances had reduced by 8.1 percent, reaching KD 940 million. This was the
first time since 2012 that the remittances are less than one billion.
Money laundering and
black market
In the Basel Anti-Money Laundering (AML) Index of 2017, Kuwait came third among
the Gulf countries and fourth among the MENA countries in terms of
fighting money laundering and financial terrorism.
Qatar came first and the United Arab Emirates was last in
the Gulf level. In the index issued recently, Kuwait recorded 5.53 points to
occupy 90th rank in the international level.
Experts highlighted the negative impacts of applying the
parliamentary bill on the banking sector, as it may lead to the emergence of a
black market for expatriates to remit their earnings through “shadow
companies”, which the supervisory bodies are trying to eliminate.
International
warnings
International financial institutions are warning against imposing taxes on the
remittances of expatriates. The International Monetary Fund (IMF) stressed in
its report that levying the remittances of expatriates will have negative
impacts on the private sector, and will increase the cost of production.
However, if the move is accompanied with increase in
salaries, it will reduce the competitive ability of the private sector. IMF
said the move will also lead to absence of supervision and emergence of black
market.
Levying the remittances of expatriates will eventually prove
to be ineffective and difficult to manage because it will lead to transfer of
remittances from the banking system and encourage lack of financial intervention.
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The so called "economist"/"financial expert" with a PHd who was pushing for this wasn't aware of the repercussions?
