By Staff writer
Proposed 5 percent tax will turn region into undesirable work destination for expats, says fund
Imposing a tax on the remittances and incomes of expats in the Gulf will lead to negative consequences, as foreigners make up 90 percent of the region's private sector workforce, the International Monetary Fund (IMF) has warned.
The proposed application of a 5 percent tax, under review in several GCC countries, would result in 0.3 percent ($4.2 billion) hit on marginal revenue of the region’s GDP, Arab Times reported.
Total remittances from GCC countries is $84.4 billion annually, according to the IMF.
The organisation added that the tax would result in administrative and operational costs that may reduce revenues and competitiveness in the private sector.
It added that the income of expats in the GCC would reduce if such a tax was imposed, because of the fact that unskilled workers make up 80 percent of the total expat workforce in the GCC.
The tax would also turn the region into an undesirable work destination for expat employers, who would look for opportunities elsewhere, the IMF said.
This is the unfortunate reality. The tax free- we-have-all play that has worked for 50 years is drawing to an end. While this will have short term consequences, the long term will be that people will see the tax as a part of living in the gulf and eventually accept it.