The latest decision of the government of Saudi Arabia regarding imposition of tax on the earnings of non-Saudi workers may have an impact of $370 million on remittances inflows to Pakistan,
said analysts on Thursday.
There would be no immediate impact on inflows of remittances to Pakistan in FY13, however, it is estimated that the impact would reach $370 million in the following year, said Abdul Azeem, an analyst at InvestCap Research.
According to the Bureau of Emigration and Overseas Employment (BEOE), Saudi Arabia has become the largest market for Pakistani workers in the world.
Remittances from the Kingdom grew by 10-year compound annual growth rate of 24 percent and reached $3.7 billion in FY12. The imposition of tax on non-Saudis hints that immediate impact on remittances flow may not be very significant unless all the stakeholders (foreign companies in Saudi Arabia) reach any consciences, said the analyst. Last month, The Saudi Arabian government announced that Saudi Arabia-based private sector companies that employ more foreigners than Saudi nationals will have to pay 200 riyals or $52 a month for excess of each non-Saudi.
The measure aims at helping provide Saudi nationals with more employment opportunities.
There are more than 1.5 million Pakistanis working in Saudi Arabia and the number is consistently increasing, said analyst, adding that the decision would directly impact the remittances to the parent country, ie, Pakistan.
Around 80 percent of Pakistanis in Saudi Arabia earn less than 2,500 riyals per month and, under the new tax regime, they would have to bear more than 10 percent negative impact on their earnings, which resultantly will hurt their ability to remit funds.
“If we take $3.8 billion as proxy for FY13, then during the aforementioned period the estimated decline in the amount to be remitted from Saudi Arabia settles at $184 million,” said analyst.