A controversial new policy in Saudi Arabia of levying financial penalties on companies that employ too many expatriate staff will not be reversed, one of the kingdom's most prominent commerce officials warned.
Following the introduction of the tax in November, employers with a higher proportion of foreign staff than Saudis must pay SAR2,400 (US$640) each year per overseas worker. The policy is aimed at encouraging more private companies to hire Saudi nationals, which according to government estimates make up less than one-tenth of all employees in the sector.
The move has drawn a mixed reaction across Saudi's business, government and even religious circles. Prince Alwaleed bin Talal, chairman of Kingdom Holding and the Arab world's wealthiest businessman, praised the decision, while the kingdom's legislative Shoura Council criticised the rule, claiming it had not been consulted and that it would harm the Saudi economy.
Earlier this week, even Saudi Arabia's top religious cleric weighed in on the debate. "The Ministry of Labour has to explain the logic justifying this levy on expats,” Grand Mufti Sheikh Abdulaziz Al-Alsheikh, adding that the decision was “not based on clear judgment”.
Despite the objections, Saleh Kamel, chairman of Jeddah Chamber of Commerce and Industry (JCCI), this week said that reversing the policy was not being considered and that businesses can expect more similarly tough measures to follow. “The expat levy file has been closed forever and businesses have to embrace even tougher decisions in the future,” he was quoted as saying by English language daily Arab News.
The JCCI, which itself opposes the policy, said it had prepared a study outlining potential legal violations in the Ministry of Labour's decision, but had been urged not to present its concerns to Saudi authorities. “This has closed the door of discussions on the issue,” Kamel was quoted as saying.
One estimate has placed the cost of the decision to the Saudi economy at SAR60bn.