Saudi body rejects levy on foreign workers

A Saudi advisory body rejected Sunday a proposal to tax the earnings of millions of foreigners working in the oil-rich kingdom.

The head of the consultative Shura Council said the body, which has no legislative powers, voted against a draft bill proposing income levies on non-Saudis earning more than 3,000 riyals ($800) per month.

Council Secretary-General Hammoud al-Badr told the Saudi Press Agency that council members found it "unsuitable to tax the income of individuals regardless of their wage bracket."

Foreign firms operating in the kingdom pay an annual corporate, tax, but expatriates, who form the bulk of the work force, have not had to pay taxes since the 1970s.

Foreigners, mainly from Egypt and the Indian sub-continent, make up about a third of the 21-million-strong population.

The Shura Council's recommendations must be approved by the kingdom's senior leadership before becoming binding.

The proposed tax law is part of Saudi Arabia's efforts to reform its welfare-dominated economy and diversity state revenues away from oil sales, which account for 80 per cent of its income.

The International Monetary Fund and some top economists have advised the Saudi government to introduce various domestic taxes and other reforms to help diversify state income.