Following through with its Kuwaitization plan to reduce the number of expats and increase employment among nationals, the Kuwaiti government had proposed an expat remittance tax. Now, according to Kuwait Times’ (KT) sources, the government has rescinded the proposal for this new law.

VAT takes precedence 

 “The cabinet’s economic affairs committee argues that imposing fees on expats’ remittances would harm the economy, force specialized manpower out of Kuwait and scare away foreign investments,” the sources explained.

Instead, the government is focusing all its attention on proceeding with its VAT bill during the next parliamentary term which kicks off in October.

“The government is very keen on passing the VAT law to achieve the economic reforms suggested by IMF and follow the steps of Saudi Arabia and the United Arab Emirates,” KT’s sources explained.

In Saudi, the newly introduced 5% VAT at the start of the year has led to slight inflation in prices, with financial services company Al Rajhi Capital estimating consumption to remain relatively flat until 2020, increasing just 3.8%. In the long run, VAT is expected to bolster the Saudi economy, with consumer spending to remain relatively unaffected. The law in Kuwait could have a similar effect.

Expats let out a sigh of relief

With the Kuwaitization plan in full effect, life for expats has been difficult in recent years. The latest government figures by the Public Authority for Civil Information show that there are 3,130,463 non-Kuwaitis in the country, representing 70% of the population.

KT’s sources pointed out that the government had officially notified the parliament that it rejects parliamentary demands to cancel decisions of increasing the fuel, electricity and water prices, all of which have had an adverse effect on the cost of living for expats, and particularly those with low incomes.

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