Kuwait central bank governor warns of negative impact of remittance taxes

The governor of Kuwait’s central bank has warned of the negative impact of a tax on remittances as the country’s high population of foreign workers continues to dominate political debate.

Mohammad Al Hashel said the bank does not support a tax on remittances because the “negative impact on the overall economy is far greater than the expected income”, local daily Al Seyassah reported on Tuesday.

He added that remittance figures circulated by the country’s media were exaggerated and didn’t take into account the costs of operating and administrating a tax as well as likely efforts to avoid paying the fee by using other channels.

MPs in the country’s National Assembly parliament have repeatedly called for the introduction of limits and fees for foreign workers in recent months as the government seeks to introduce new austerity measures.

Recent calls have included increasing expat healthcare costs and banning new arrivals from driving. The government will also introduce new increased utility rates for businesses and expats later this month but not Kuwaiti citizens.

Read: Kuwait to increase utility rates for businesses, expats from May 22

Al Hashel was quoted as saying a tax on remittances would increase costs for consumers, similarly to fears of the new utility rates.

The research department at Kuwait’s Ministry of State for National Assembly Affairs also recommended in a March study that the country implement a system to deport marginal labourers and set a timetable to stop the hiring of expats in the private sector, according to reports.

Some estimates suggest foreign workers make up 70 per cent of Kuwait’s 4.4 million population.