Saudi councils call for foreign worker levy to be scrapped

Saudi Arabia’s Shoura Council is set to meet with senior government officials amid concerns a new fee on foreign employees could kill off up to 40 per cent of the kingdom’s small and medium enterprises.

Local reports suggest that the Council of Saudi Chambers has also called for meeting with labour minister Ali Al-Ghafis to ask for the levy, which takes the form of a SAR300-400 ($80-107) monthly fee for each foreign worker a company employees, to be revoked.

Lawyer Khaled Al Khaibary is reported to have said that 2,000 SMEs were also planning to submit a joint petition and even a lawsuit to have the levy scrapped.

Some businessmen estimate the new charge will see 30-40 per cent of SMEs leave the market due to spiralling costs during an already challenging period that has seen economic growth slow down, the introduction of a 5 per cent value added tax and increases to fuel and utility costs, according to Saudi Gazette.

Many are said to be struggling to pay back loans taken out before the new fee was introduced on January 1 after being caught by surprise by a late December confirmation that only firms with five or fewer employees would be exempt.

Read: Saudi companies with five or fewer employees exempt from new expat fees

Okaz reported in December that the government was expecting to raise $6.3bn from the new fee in 2018, $11.73bn in 2019 and $17.33bn in 2020. This will coincide with an annual increase in the charge from SAR300-400 in 2018 to SAR500-600 ($133-160) in 2019 and SAR700-800 ($187-$213) in 2020. Firms with a workforce that is 50 per cent or more Saudi pay the lesser amount.

Read: Saudi government to raise $6.3bn from 2018 expat levy

Failure to pay the levy will result in access to labour ministry services being blocked including the issuance of residence visas and licences.

Saudi Arabia unveiled a $19.2bn stimulus package for the private sector in December that included SAR1.6bn ($426.6m) for indirect lending to SMEs, SAR2.8bn ($746.5m) for an SME investment fund and SAR7bn ($1.86bn) to refund government fees paid by new SMEs.

Read: Saudi unveils $19.2bn stimulus package for private sector

However, the refunds do not include the new fee at this time.

SMEs in Saudi Arabia are considered firms with one to 249 employees and an annual turnover of SAR3m ($800,000) to SAR200m ($53.3m).

Shoura member Abdul Rahman Al-Rashid, who is chairman of the economic and energy committee, was quoted as saying the consultative council would discuss the issue in detail after hearing of the problems encountered by entrepreneurs.

The Council of Saudi Chambers has also called for a meeting with the labour ministry on Sunday to discuss the issue.

Abdul Aziz Al-Mughtarif, chairman of Abha Chamber, said fees should not be imposed on skilled foreign workers until there are sufficient Saudis to replace them.

“It’s not easy to Saudise jobs in the industrial sector within a day or two. So we should not consider the industrial sector like other sectors while implementing the Saudisation programme,” he was quoted as saying.