The more than eight million expatriates living and working in the Kingdom must be breathing a collective sigh of relief at the news that the Shoura Council has rejected plans to tax them. There are good reasons why they should not be taxed. There is the moral reason. It would be grossly unfair to tax foreigners when Saudis are not taxed on their income. As such, it would also be a breach of Saudi Arabia's obligations as a member of the World Trade Organization. It is illegal to treat foreign manpower differently from national employees. Doing so could see the Kingdom in hot water and forced into humiliating retreat. Of course Saudis pay Zakat, but only on assets not used. That is a different matter. Then there would be non-Saudi Muslims saying that, as Muslims, they were being discriminated against and appealing to the courts for judgement, which the authorities could easily lose. There is also the fact that some foreigners are indeed taxed by their home governments on their earnings here. Before Saudi Arabia could impose taxes it would need to establish double taxation agreements with every country in the world. That is going to take a long time. Lastly, unlike 10 or 20 years ago, the vast majority of expatriates in Saudi Arabia are not earning enormous salaries. They are largely unskilled laborers earning a pittance. And now there is the suggestion that they should take home even less. Yes, foreign labor remits a small fortune — the last official figure was SR15.3 billion in 2006. But the notion that somehow these people are sucking money out of the country is plain wrong. It is their money. They have worked extremely hard for it. There is in the mind of some the notion that taxing foreigners will force them to leave and thus create more jobs for Saudis. Creating jobs for Saudis now certainly has to be the priority if there are not to be serious social problems in the future. But forcing Bangladeshi street cleaners and Pakistani laborers to quit is not the answer. Saudis are not going to take up their jobs. Taxing foreigners, even if it were internationally legal, might create a few extra jobs for Saudi accountants, advertising managers and the like — and the emphasis is on “might” — but the cost to the country would far outweigh any gains: a few jobs in return for the collapse of the unskilled and semiskilled labor market. The matter of job creation will not be solved by playing with taxes. It will be shot down in international courts. If taxes are to be levied, there has to be a level playing field. There have to be the same taxes for everyone, expatriate and Saudi alike, and based on a rising percentage scale. Expatriates can breath easy — but for how long? Saudi Arabia is rich but the calls on its wealth expand with the population. It has been said that in life only two things are certain: death and taxes. So far Saudi Arabia has managed to avoid the latter. But sooner or later, the Saudi government budget will need more than oil revenues to balance its budgets. __
