KUWAIT: The National Assembly’s financial and economic affairs committee yesterday defied advice from the Central Bank, the government, experts and the Assembly’s legal panel and approved a draft law to impose taxes on remittances by foreigners living in Kuwait. Members of the committee voted four to one in favor of the draft law, which will become legislation only if the National Assembly passes it and the government accepts it.

Rapporteur of the committee MP Saleh Ashour said the six-article bill stipulates that expatriates must pay a percentage on all their money transfers abroad, but the proposed legislation takes into consideration low-income workers. He said that the draft law states that transfers of up to KD 99 will be taxed 1 percent, those between KD 100-299 will be charged 2 percent tax, amounts between KD 300-499 will incur a 3-percent tax, while amounts of KD 500 and above will be taxed 5 percent. This means that a person who sends home KD 1,000 will be asked to pay KD 50 in tax above the commission charged by moneychangers and banks.

Ashour said the bill proposes that the taxes will be collected by the Central Bank and paid to the finance ministry. He said the bill stipulates that all money transfers must be made through official moneychangers and banks and not through illegal channels. The law stipulates a jail term of up to five years and a fine of at least double the money transferred for those who violate the law and make the transfers through the black market. Some expatriates send their remittances through illegal channels because of speed and cheaper rates they are offered.

Ashour said the main objective of the law is to encourage expatriates to keep their money in the country and invest it here. Head of the committee MP Salah Khorshid said the proposed bill was selected from four draft laws submitted by various groups of lawmakers. He insisted that the committee was told by the Assembly’s constitutional experts that the action does not involve any constitutional suspicion and is entirely in line with the Kuwaiti constitution and laws.

Khorshid, a former commerce minister and businessman, said the government expressed reservations on the draft law because it wanted the tax to be levied on Kuwaiti citizens as well. He said that the committee rejected the government proposal and decided to impose the tax on expatriates only. The lawmaker said that in the past five years, expatriates remitted some KD 19 billion, which is a huge amount and the aim of the bill is to boost the government’s non-oil revenues.

If the law goes through, it will be the first time Kuwait imposes a tax on foreign remittances and this could trigger a black market for money transfers and foreigners to start leaving the country. The law exempts transfers by foreigners related to investment protection.

By B Izzak