RIYADH — Minister of Finance Mohammed Al-Jadaan said that the Saudi government is currently reconsidering the fee for the dependents of expatriates in the Kingdom.

“The move is in light of its vision to attract new talents to the Saudi market,” he said while replying to questions in a program on Socrates podcast, Al-Arabiya Business reported.

It is noteworthy that the fee on each dependent of an expat worker came into force in July 2017. First year, the fee was SR100 per dependent per month. Then every year it is being increased by SR100 till the fee reaches SR400 per dependent per month since 2020.

Al-Jadaan said that the Saudi economy is currently passing through an excellent phase. “The decision to impose dependents’ fee has weakened the spending in the economy and forced some expatriates to move their children outside the Kingdom, and thus transferring the salary to outside the economy,” he said.

Al-Jadaan said that the government has a significantly different perspective with regard to its decision to impose dependents’ fee. “The government’s vision is different, especially since many services are subsidized, such as electricity, water, gasoline, some healthcare services, security, roads, and road depreciation. When more than two million people use such things for free, the economic factors led to the decision that it is better to impose the fee on dependents as they are the beneficiaries of this support,” he said while noting that 90 percent of the money, which is to be spent or consumed otherwise inside Saudi Arabia, is being imported and thus the largest part of the money ultimately goes out of the Kingdom.

The minister noted that the decisions to lift some subsidies and target subsidies for those who deserve support, have resulted in bringing in candid benefits and impact, and these decisions are being re-evaluated periodically. “If the benefits from the presence of dependents are higher, we will review the decision to impose the fee, especially since the market currently aims to attract talent and ensure the stability of expatriates and their families as long as they are productive for the economy,” he said.

Al-Jadaan also responded to queries that the imposition of value-added tax (VAT) has faced some criticism such as that VAT is not proportional to income, and thus it is a higher rate for those with lower income. The minister said that under the Gulf Cooperation Council (GCC) and the Gulf common market systems, financial policies are supposed to be similar among the member countries. In this perspective, he said, the imposition of income tax on individuals requires in-depth economic studies in terms of pros and cons. “However, the compatibility with the Gulf countries with regard to tax is very difficult,” he said.

“When the decision was made to impose a value-added tax, it took into account the effect of cost of reform on the lowest income classes through the Citizen’s Account, in addition to studying the cost of the tax on the food basket, electricity and water. Instead of supporting those with higher incomes, support amounts were allocated to the lowest income classes after unifying the tax on everyone went through the Citizen’s Account, and when gasoline prices rose, the Citizen’s Account was looked into again,” he said while emphasizing that a policy cannot be without defects, and “if the advantages outweigh the disadvantages, we try to reduce those defects.”

Referring to studies about the economic and social impact of income tax and the cost of its imposition, Al-Jadaan explained: “We discussed its impact, and even the exit of funds as some rentier states rely on income tax to a large extent, which was dreadful as far as some Gulf countries are concerned. The cost of imposing income tax is high compared to the implementation of the value-added tax, both in terms of revenues and information, such as sectors where spending and concealment are high.” “This is in addition to the introduction of the electronic invoice by which the tax administration now knows the size of demand for each commodity, the number of consumers for it, the type of commodities and their prices, the price difference and its causes, the hidden cost, and money laundering, in addition to the logistical problems, which help not only manage the tax system but also manage the economy as a whole.

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