Expat income tax just a ‘proposal’ – Saudi finance minister

The introduction of income tax for foreign residents as part of Saudi Arabia’s National Transformation Plan is just a proposal for now, the country’s finance minister said on Tuesday.

When questioned regarding the initiative, which would impact a third of the country’s 30 million population, Reuters reported that Ibrahim Alassaf backtracked saying the country was considering the proposal but no decision had been made.

“There will be no tax on citizens. As for residents’ tax, it is a proposal, nothing has been approved yet and it will be examined,” he said in a panel discussion in Jeddah to discuss the reform plans.

Documents released on Monday said the country was allocating SAR 150m ($40m) to prepare income tax for foreign residents.

Recently Saudi Arabia has been seeking to employ more nationals in the private sector, an area it has traditionally relied on foreign labour to fill.

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Untaxed salaries are deemed to be one of the country’s main attractions for foreign workers.

Reuters cited Labour Minister Mufrej al-Haqbani as saying there was no strategic target to reduce the number of expats, like in neighbouring Kuwait.

The country has also proposed the introduction of value-added tax, a tax on sugary drinks and cigarettes and cuts to water and fuel subsidies.

The five-year National Transformation Plan published on Monday, builds on a wider set of reforms launched in April as part of the country’s Vision 2030.

Read: Saudi to triple non-oil revenue under National Transformation Plan

It comes as the country seeks to wean itself off of oil, after being hit hard by plunging prices since mid-2014.

Alassaf said the kingdom planned to pay for part of its SAR 270bn ($72bn) five-year economic reform plan with efficiency savings and spending cuts on existing projects.

“Part of it will be made available from cancelled projects or projects that were downsized, and part of it will be made available from revenues that will rise — oil and non-oil revenues.” Efficiency gains would also help to fund the reform plan, Alassaf added.

He said the government aimed to balance its budget by 2020.

Last month the International Monetary Fund described Saudi Arabia’s reform plans as “appropriately bold and far reaching”.

It predicted Saudi would post a 14 per cent budget deficit this year from 16 per cent last year.