Why do you work in the Middle East? Nine times out of ten, the average expat’s response will include something about tax-free earnings, high standard of living and the constant sunshine.
But with governments in western countries looking for any way possible to raise revenues, how long before they look to their high earning expats abroad to give something back and help them battle their spiralling deficits?
Already the UK is ramping up its crackdown on expats who own property in Britain but have not coughed up the tax due on their buy-to-let properties or have sold homes and not paid duty owed to the treasury.
Since 2011, British tax officials have launched 40 specialist taskforces to target overseas tax dodgers in the buy-to-let sector. In Yorkshire alone this has led to 12 cases of expatriate landlords being criminally investigated. Meanwhile, the South East taskforce, launched in November 2012, expects to recover $6m in unpaid tax.
While Brits currently get away without paying income tax while abroad, their American counterparts are not so lucky. US expats who earn money abroad and spend at least 330 days of the year living outside the country already pay taxes, but the Foreign Account Tax Compliance Act (FATCA), signed into law by President Barack Obama in 2010, comes into effect in July 2014 and looks set to earn Washington even more cash from its expats abroad.
Under the law, foreign banks, including those in the Gulf, must declare details of all Americans who hold accounts with them and have assets exceeding $50,000.
American expats who have not been declaring earnings are likely to be caught in the tax net by this new move and they have only a year to get their finances in order as Saudi Arabia has already signed up to the law and UAE lenders will likely be targeted to comply.
Adnan Yousef, a member of the Union of Arab Banks, told the Arabic-language daily newspaper Al-Eqtisadiah he estimates the law will earn the US Treasury a SR1 billion ($266m) bonanza in unpaid taxes.
“Gulf banks will apply the new law to subject the accounts of US citizens to gradual tax detection to make sure US citizens do not evade any taxes on his income in any state,” Yousef was quoted as saying.
India is also getting in on the revenue stream that can be generated from wealthier citizens living abroad. It was revealed Indian customs officials are increasingly cracking down on expatriates returning home and bringing gold with them.
"I had to attend a wedding so I was carrying jewellery. The officials did not allow me to take the jewellery with me unless I paid duty," one Indian expat flying from Dubai was quoted as saying by the Daily Mail.
This week the Natwest International Personal Banking Quality of Life report found the UAE is becoming an increasingly popular destination for British expatriates, edging out more traditional destinations such as France and Spain.
The emirates is now the third-most popular destination for Britons seeking to live abroad, up from sixth place last year, and ninth place in 2011.
"It seems expats are willing to adjust their lifestyle in exchange for a stronger economy and better job opportunities," the report said.
But if London goes the way of Washington and tries to make its expats abroad start paying taxes, how long before the Gulf starts to look less enticing?For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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