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Kuwait inches closer to taxing expat remittances

Draft law stipulates prison, fine for using back channels to send money abroad

Manama: A Kuwaiti parliamentary committee has endorsed a draft law to impose taxes on remittances by expatriates in the country.This came despite recommendations from the government, the central bank and financial experts against such a move.

The members of the financial committee voted four to one to refer the bill to the parliament for debate among its members. 

If the draft is approved, it will be referred to the government and in case the cabinet accepts it, it becomes law.

The legislative committee had earlier rejected the draft, saying that it was unconstitutional.

The Central Bank said that imposing taxes on remittances would harm Kuwait’s reputation, weaken the financial situation in the country, affect the fight against money laundering and terrorism and create a parallel black market for sending money home.

However, Salah Khorshid, the chairman of the financial committee, said that they had taken into consideration the views of consultants, legal experts and a constitution specialist to ensure there were no breach of the constitution.

He added that the government had reservations about the bill “because it has the intention of imposing taxes on both Kuwaiti citizens and expatriates,” he added.

However, the committee said that taxes should be levied only on foreigners.

Such a decision would help provide the state with KD70 million from the remittances that amounted to KD 19 billion, he said, quoted by Kuwaiti media.
Khorshid argued that three other Gulf Cooperation Council (GCC) countries had a law permitting taxes on remittances.

The GCC comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

“Banks and moneychangers take fees on remittances, and the government should be the one to take them, especially that the figures that we see make us keener on the money and on the interests of the state,” he said, quoted by Kuwaiti daily Al Jarida on Monday.

MP Saleh Ashoor, the financial committee rapporteur, said that extensive consultations with experts and advisors confirmed that the draft law was fully constitutional.

Article Three of the draft law gives the Central Bank the right to see that the tax money is transferred to the Ministry of Finance, he said.

Under Article Four, any bank or moneychanger that does not comply with the law will be fined a maximum of KD10,000 while anyone who remits money not through the accredited banks and moneychangers will be sent to prison for a maximum of five years and a fine that amounts to the double of the money sent abroad.

Under the draft law, remittance taxes will be gradual with a one per cent tax for remittances of up to KD90, two per cent for KD 100-200 remittances, three per cent for KD 300-499 and five per cent for KD 500 and more.

The remittance tax will be in addition to the commission charged by moneychangers and banks.

Several analysts who opposed imposing taxes on remittances have warned against the development of a black market and back channels that allow expatriates to send money home faster and at more convenient rates.

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