Saudi Arabia is considering taxing millions of foreign residents as the kingdom seeks to reduce its reliance on oil revenue after the plunge in crude rates.
The proposal was included in the country’s National Transformation Plan, an ambitious multiyear program released this week. So tax element is only an initiative that could be discussed,Finance Minister Ibrahim al Assaf said on Tuesday at a news conference in Jeddah.
Economists said the proposal is unlikely to see the light soon as long as it could hamper the kingdom’s ability to attract the foreign investment it needs to revive growth hit by the oil slump. Still, raising the possibility of income tax in the blueprint even if only on foreigners shows the readiness of its architect, Deputy Crown Prince Mohammed bin Salman, to consider steps that past Saudi rulers have shunned. The kingdom is also joining other members of the six nation Gulf Cooperation Council in imposing value added taxation starting from 2018. Prince Mohammed, the king’s son and ‘secondinline’ to the throne, has already cut fuel and utility subsidies and proposed reducing the ‘public sector’ wage bill.
The status of Gulf Arab monarchies as ‘tax free’ havens has helped attract millions of foreign workers.
There are nine million foreigners living and working in Saudi Arabia, Mufrej ‘AlHaqbani’, the country’s labor minister. Might be inevitable now, the revenue wasn’t missed when oil rates were high. Assaf said the government has no plans to tax Saudi nationals.
Mohammed Alsuwayed, the Riyadhbased head of capital and money markets at Adeem Capital, said he doesn’t expect expats to be taxed any time soon. Simon Williams, HSBC Holdings Plc’s ‘London based’ chief economist for central and eastern Europe, the Middle East and North Africa.
, as oil costs plummeted from more than 30.
Al Assaf’ reiterated the government’s target to balance the budget by 2020 and confirmed current discussions to sell international bonds. Conforming to the median estimate of a Bloomberg survey, economic growth will likely slow to 5 percent this year from 4 percent in 2015. The International Monetary Fund expects the world’s top oil exporter to post a shortfall of 135 economic percent output this year.
The NTP sees public debt climbing to 30 economic percent output by 2020 from 7 percent currently. The increase suggests that the kingdom may raise an additional