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Shura Council approves draft legislation

Saudi tax on foreigners set to boost state revenues

AFP, Riyadh
A draft bill to levy a proposed 10 per cent income tax on the earnings of foreigners is expected to net around 1.6 billion dollars for state coffers, an economist said Monday.
"I believe that within one to two years, the bill will be a good source for non-oil revenues ... It is expected to yield some six billion riyals (1.6 billion dollars)," Abdulwahab Abu-Dahesh, senior economist of Riyad Bank told AFP.
"It will also help reduce unemployment among semi-skilled and unskilled Saudi labour because it will narrow the salary cap between Saudis and expatries," Abu-Dahesh told AFP.
Saudi Arabia's Shura (Consultative) Council on Sunday provisionally approved draft legislation requiring foreigners earning more than 3,000 riyals (800 dollars) to pay income tax.
Mohammad al-Qunaibet, head of the Council's economic affairs committee, explained that there has been no final approval of the 10 per
cent figure.
"The 10 per cent has been proposed by the finance committee ... The Council has not determined as yet a specific per centage," Qunaibet told AFP.
Qunaibet said that the Council had completed debate on the bill.
"It will be returned to the finance committee to assess the members' remarks on the articles. It will then be sent back to the council where voting will be taken on each article," he said.
The package of draft tax legislation -- 75 articles -- will be effective only after it is approved by the government, which has the power to issue new laws, as the council can only make recommendations.
The legislation is an amendment of a law issued 50 years ago stipulating that foreigners working in the oilrich kingdom should pay income tax but never implemented.
Around seven million expatriates live in Saudi Arabia, five million of whom work, mostly in the private sector. Unofficial figures indicate foreigners remit around 18 billion
dollars to their countries annually.
The new legislation being pushed through would also reduce taxes from 45 per cent to a maximum of 30 per cent on the profits of foreign companies in an effort to lure the billions of dollars in foreign investment required to boost the Saudi economy.
"The legislation aims at reforming the structural defect of the budget and help reduce unemployment among Saudis. It will help make the domestic economy a tax-based economy. It may not be too long before Saudis are included," Abu-Dahesh said.
Gulf Arab nationals and companies are exempt from the proposed law because they, like Saudi counterparts, already pay zakat (Islam's equivalent of tax), which works out to 2.5 per cent of a firm's annual turnover.
Saudi Arabia, which sits on a quarter of the world's proven oil reserves, has projected a 12-billion-dollar budget deficit for the current 2002 fiscal year.