Kuwait MPs to discuss remittance tax amid central bank warnings

Members of Kuwait’s National Assembly will this week discuss a report into a controversial tax on foreign workers’ remittances.

The financial affairs committee approved a draft law to introduce the tax earlier this month following a rejection from the legal and legislative committee in January and warnings from the country’s central bank.

Read: Kuwait committee approves remittance tax

The financial affairs committee will discuss a report covering the law in its meeting today. The tax is also part of the wider assembly’s agenda for sessions on Tuesday and Wednesday, state news agency KUNA said.

The bill states that foreign workers would be taxed on their money transfers abroad, on top of normal commissions and charges by banks and exchange houses, based on the amount sent.

Transfers of up to KD99 ($330) would be taxed at 1 per cent, transfers of KD100-299 ($334-$997) at 2 per cent and transfers of KD300-499 ($1,001-$1,664) at 3 per cent. Those of KD500 ($1678) and above would be taxed at 5 per cent.

The legal and legislative committee unanimously rejected the proposal due to concerns it would be unconstitutional for discriminating against a specific group and that it could lead to rising costs and the formation of a black market for transfers.

Read: Kuwait parliament committee rejects proposed remittance tax

Kuwait Times reports that the country’s finance minister Nayef Al-Hajraf said he shared the financial committee’s concerns for finding new sources of income but highlighted the risks of constitutional violations in proposals targeting Kuwait’s foreign population only.

He said reforms like this should also be comprehensively reviewed and studied amid comments from the central bank that the current legislation has technical and financial loopholes.

The central bank said reform efforts should instead focus on state-provided services that are currently underpriced, leading to waste and overuse, according to the publication.

It also argued that an annual remittance figure of KD4.14bn ($1.38bn) for expats was misleading as transactions were sometimes conducted on behalf of citizens and warned of price increases and demands of pay rises from workers that would negatively affect Kuwaitis.

Other issues included that the law could be in breach of Kuwaiti currency law and article 8 of the International Monetary Fund treaty preventing members from imposing restrictions on payments and transfers for international transactions, according to the central bank.

The law must be approved by the National Assembly parliament and accept by the government to be enacted.

Foreign workers currently make up around 70 per cent of Kuwait’s 4.5 million population.