Essay On Remittance Tax

The possible impact of Remittance tax on the expat population

One of the measures proposed to combat the drop in oil prices, and to introduce fresh revenue streams into the economies of some Gulf countries is through taxing the money sent by the expat population to their home countries in the form of remittance.

The Kuwait Government and Parliament have expressed their support for a proposal that will impose taxes on expatriates’ remittances according to the latest media reports. The details mentioned in the proposal are a two percent tax for expats remitting money below KD 100, while the tax is four percent on remittances in the range KD 100 to KD 500, and five percent on remittances exceeding KD 500. There are even penalties mentioned for

The remittance tax can be considered as cost-elastic, and would negatively impact economic growth. Studies on the remittance outflow are focused on the advantages for the Gulf governments, where the tax remittance is viewed as a deflationary force – with respect to consumer expenditure, keeping it in check given that expatriate laborers lean towards a frugal life in the interest of increasing their remittances, in addition to helping the economy by providing low –wage expatriates.

Given the limited assessment of the remittance tax, the effect of a remittance tax on a socio-economic scale should be better researched to judge its long-term effects on the economy and the expat population.

In the meanwhile, a GCC Government can find other means to reduce remittances as a way to stop money from being funneled out of the economy. There are far more effective measures such as incentivising domestic investments, opening up the economy to business and market from foreign entrepreneurs and allowing families to be reunited via easier procedures which decrease the need to