Converters in Kuwait between increasing revenues and obsession with the black market

Mahmoud Kafrawi - Kuwait

More than three million expatriates working in Kuwait are expected to see things in the Kuwaiti National Assembly in the coming days, after the resumption of talk about the passage of the tax law on expatriate transfers.

The Finance and Economic Affairs Committee of the National Assembly approved in April 2018 a bill to impose surcharges on expatriate transfers on the pretext of revitalizing the economy and adding new sources of income to the country's general budget.

According to the committee's proposal, the transfers of the expatriates were divided into four segments based on a 1% tax on transfers from one dinar to 99 dinars (from 3.29 to 326 dollars), 2% for transfers ranging from 100 to 299 dinars, and 3% for amounts of 300 To 499 dinars, and 5% for transfers exceeding 500 dinars, with the provision to punish the evader to imprisonment for a term not exceeding five years or a fine of ten thousand dinars.

At the time, the Kuwaiti government rejected the application of the law for several reasons, most notably the negative impact on the country's reputation as a global financial and trade center. The IMF warned of the impact of the move on the private sector. That their application would have a severe impact on low-wage migrant workers.

Despite the suspension of the project during the last period, the Kuwaiti media was surprised by the seven deputies asked to expedite the discussion of the report of the Finance and Economic Committee on the law of transfer tax and voting at the meeting on 14 May.

Kuwait has a population of about 4.75 million, according to the Public Authority for Civil Information, of whom 1.4 million are Kuwaiti, compared to 3.3 million, one third of whom are domestic workers and cleaners, ie low wage earners.

The volume of incoming conversions
According to the Central Bank of Kuwait, the volume of remittances in 2018 amounted to about 15 billion dollars, compared with 12.5 billion in 2017. These transfers account for about 10% of the country's GDP.

The monthly economic report, independent of the country's financial situation, indicates that the domestic labor force alone numbers about 700,000 workers, equally divided between the sexes, mostly from India, Bangladesh and the Philippines. This category expects the report to open exemptions to the law - once approved - since taxpayers will often bear the brunt of poor salaries.

While proponents of the tax draw from the magnitude of the money being diverted, many criticisms have been directed at Kuwaiti laws that do not help expatriates invest their money in the country. With the exception of the stock exchange only, an expatriate needs a Kuwaiti partner for any economic activity he intends to do.

Al-Shall's editor, economist Jasem Al-Saadoun, describes this proposal as bad in humanitarian, economic and political terms. It is no more than an attempt to escape some costly entitlements, because the correct thinking of imposing a tax means that the most wealth and income will be borne by the progressive income tax, But those who own wealth often share the power of decision-making - according to Saadoun - so it is unlikely that such a tax would be approved.

Accommodation Dealers
Al-Saadoun said in his speech to Al-Jazeera Net that most of the expatriates in Kuwait are simple professionals, and it is unreasonable to charge them for just because they are large, because the increase is due to wrong policies that are not based on fighting the residence merchants as required. Horizontal expansion of projects that inevitably require intensive and simple labor at the same time.

Talal Bahman, vice president of the Kuwait Exchange Association, reduces the impact of the tax on companies involved in the exchange sector - about forty companies - over the long term, pointing out that the stronger impact will be detrimental to the country's reputation as a result of the law's contribution to creating a market. Black money transfer away from the central bank and various authorities.

Bahman added that the imposition of a 5% tax on remittances will inevitably lead to the search for other ways that are not subject to censorship, and may open the way for the transfer of funds to suspicious parties in light of the repercussions of the region, while at the same time not inviting the Union to any discussions on imposing Taxation by the National Assembly or the relevant authorities.

Ibrahim Said, a business manager at a company, said the idea of ​​imposing restrictions on expatriate transfers was not new. Iraq had already applied it under Saddam Hussein, but the result was to find ways to smuggle money out of Iraq.

He added that this approach would also negatively affect the desire of capital inflows to invest in Kuwait as a result of creating fears related to the possibility of applying any other taxes as suddenly as is happening now, so the biggest damage will be on the Kuwaiti economy.