KUWAIT CITY, Nov 25: The International Monetary Fund (IMF) has indicated that imposing tax on expatriates’ remittances and incomes, the possibility of which is currently under study in some Gulf countries, will lead to negative consequences especially since expatriates constitute about 90 percent of the total employees in the private sector in these countries, reports Arab Times Daily.
In its report, IMF explained that the total remittances from GCC countries are about $ 84.4 billion annually.
Imposing tax of about 5 percent on these remittances will result in very little and marginal revenue of only 0.3 percent of the GCC GDP (or $ 4.2 billion), which is very modest compared to the financial reforms required in the GCC countries.
It will also result in administrative and operational costs that might reduce revenues and cause risks related to the repute of the country among the workers. The competitiveness of the private sector will also decline.
The report also stressed that the incomes of expatriates in GCC countries will reduce if the taxes are imposed, taking into account the fact that unskilled workers in these countries form about 80 percent of expatriates.
It added that another disadvantage of imposing the abovementioned taxes is that it will make the GCC countries undesirable for skilled workers who will prefer to look for employment options elsewhere.
This will lead to serious brain drain if the local talents do not possess the same skills as their expatriate counterparts.