Kuwait’s cabinet resists pressure to tax expats’ remittances

The Kuwaiti government has rejected parliamentary demands to impose fees on expatriates’ remittances arguing that the move would harm the economy and scare away foreign investments.

The country is pushing for economic reform in the next Budget and the VAT bill is on its priorities’ list during the next parliamentary term which starts in October. The government had officially notified the parliament that it rejects demands to cancel decisions of increasing the fuel, electricity and water prices, according to local media.

The drop in oil prices has left the gulf economy struggling. The budget deficit in the last five years accumulates to KD28 billion. Still, the cabinet refuses to tax expats’ remittances in fears that it would force specialized manpower out of Kuwait.

Remittances by expatriates living and working in Kuwait dropped by 13% during the first quarter of 2018, according to official figures, noting that the fall has been taking place since 2017. The statistics have shown that expats’ remittances dropped by 9% last year to KD 4.14 billion compared to KD 4.56 billion in 2016.

Parliament will receive the bill in September in order to discuss it before it goes up for voting when the resumes sessions the following month. The current plan calls for the voting session to take place before the end of the year.

Approval of the new VAT law is essential in order for Kuwait to achieve the economic reforms suggested by IMF and follow the steps of Saudi Arabia and the United Arab Emirates in reducing the economy’s dependency on oil.

Pedro Gonçalves
Pedro Gonçalves is Financial Correspondent at International Investment.

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