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Abu Dhabi, UAETuesday 25 September 2018

Kuwait's proposed tax on remittances could hit the poorest members of society

The draft law should be thoroughly scrutinised before it is voted into law

In 2014, Kuwait accounted for $18 billion in foreign remittances, according to World Bank data.  Getty Images
In 2014, Kuwait accounted for $18 billion in foreign remittances, according to World Bank data. Getty Images

The GCC has long drawn workers from around the world, with virtually every nationality represented among the expatriate communities of this region. They leave behind families and loved ones, work hard to save money and send back as much of their earnings as they can. Their remittances are indispensable to the families they have left behind, especially in the developing world, just as their services are indispensable to the health of the thriving economies of this region. The proposal by Kuwaiti Parliament to impose a fee on outward bound foreign remittances could have a hugely detrimental effect on this population.

Sunday’s four-to-one vote by the financial and economic affairs committee of the Kuwaiti parliament to introduce levies on remittances is not the last word. The draft legislation must be passed by the 65-member National Assembly and receive the government’s assent before it becomes law. Proponents of the law argue that it will generate much-needed revenue as Kuwait diversifies its economy. But there is a wall of expertise calling for restraint and cautioning against this bill. Kuwait’s Central Bank, members of the government and the National Assembly’s own legal panel have voiced their opposition to the proposal, warning it could lead to financial instability and a black market for remittances. Notwithstanding the fact that the fee on remittances will be tied to the income of workers, the proposed bill could end up penalising the poorest members of the society.

In 2014, Kuwait accounted for $18 billion in foreign remittances, according to World Bank data. A tax of between one and five per cent on money transfers by people earning as little as 99 Kuwaiti dinars (Dh1,214) is a significant loss to the families who depend on a large portion of that money finding its way home. Since it is workers in the low-income brackets who use remittance services the most, it is they who will be the hardest hit if this proposed bill comes into force. The recent death sentence handed to the killers of Joanna Demafelis, a 29-year-old domestic worker from the Philippines who was murdered by her employers, relayed a powerful message about the Kuwaiti state’s protection towards foreign workers. Having done so much to reassure its workforce of their rights, the new legislation could do untold damage to transnational relations. Opponents of the bill have called for greater transparency and heightened scrutiny before it is voted into law. That is precisely what is needed.

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