Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now

You can switch off notifications anytime using browser settings.
Stock Analysis, IPO, Mutual Funds, Bonds & More

Saudi Arabia could review expat fees as economy feels the sting

The tax forced hundreds of thousands of expats to leave the kingdom, hitting the economy hard.

Updated: Dec 10, 2018, 06.30 AM IST
By: Vivian Nereim, Sarah Algethami and Alaa Shahine

Saudi Arabia is reviewing its policy of imposing fees on expatriate workers after rising costs inflicted economic pain and contributed to an exodus of foreigners, according to four people familiar with the matter.

While it’s unlikely the fees will be canceled altogether, a ministerial committee is looking at modifying or restructuring them, one of the people said. A decision is expected within weeks, two of the people said. They all spoke on condition of anonymity because the information isn’t public yet.

Announced in 2016 as part of a drive to increase non-oil government revenue — a key goal of Crown Prince Mohammed bin Salman’s economic transformation plan — the fees have been unpopular with business owners in a country accustomed to cheaper foreign labour. Partly as a result, hundreds of thousands of foreigners have left the kingdom, hitting the already-struggling economy but failing to make much of a dent in Saudi unemployment.

The aim of the review is to reconcile the government’s fiscal needs with the ability of the private sector to hire and grow, one of the people said.

The Labour Ministry and the government’s Center for International Communication didn’t immediately respond to requests for comment.

After the kingdom’s economy contracted 0.9 per cent last year, officials are keen to stimulate the private sector, which has had difficulty adapting to some of the crown prince’s rapid policy changes.

A Bloomberg survey of analysts showed gross domestic product is expected to expand 2.2 per cent this year, still modest compared to growth rates before the oil-price rout of 2014 spurred Prince Mohammed’s overhaul plan, dubbed "Vision 2030."

Two types of so-called expat fees are currently in force. The first, charged for each familial dependent of a foreign worker, was implemented in July 2017. It started at 100 riyals ($27) a month per dependent and is scheduled to increase by 100 riyals each year. The second kind of fee was introduced in January and is borne by businesses that employ foreigners, partly to encourage them to hire Saudis.

As the charges came into effect, many foreigners decided to send their families home or left altogether. That’s affected a wide range of the businesses that served them, from restaurants to telecommunication companies. Meanwhile, despite the departures, Saudi unemployment has inched up to 12.9 per cent, its highest level in more than a decade.

Also Read

The reality behind India-Saudi Arabia's growing ties

Saudi Arabia's best bet is to crash the price of oil

Saudi Arabia to invest USD 100 billion in India

Saudi Arabia kick-starts IPO of world's largest oil company

Saudi Arabia will compromise on valuation to make Aramco IPO a success

Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links

Follow us on

Download et app

Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service