Change In Policy Causes Exodus of Expats in Saudi Arabia
The expat exodus has begun this year with already a staggering number of 303,000 expats have left the labour market in Saudi Arabia. The General Organisation for Social Insurance released figures up until September, that on average up to 1,120 expat employees were leaving the workforce. Furthermore, the number of expats who have stayed and are unemployed has increased to 66,267 during the second quarter of the current year compared to 53,084 during the first quarter.
The General Authority for Statistics(GaStat) has confirmed that 9.3% of total unemployed people in the kingdom is represented by expatriates. The Saudi crown prince Mohammed Bin Laman’s plans to reshape the Saudi Arabian economy to make it less dependent on oil and increase the number of Saudi national’s in the workforce is all part of the kingdom’s National Transformation 2020 plan.
The Saudi government has increased the family tax for non-Saudi nationals from 100 riyals to 1,200 per year and increases per dependent as well as tiers up each year to 2020. We can see a family with 2 children by 2020 paying an extra 14,400 riyals per year. The table below shows how the government is preparing to introduce this over the coming years, which commenced as of 1 July 2017.
The Saudi government is on an aggressive drive to localise its labour force and the weight of expatriate works, it aims to achieve this by increasing the above-mentioned taxes on expatriate families. This increase in tax is expected to generate 65 billion riyals by 2020.
Furthermore, there is the current Nitaqat Programme in place which is over a three year period. The government has implemented the nationalisation programme, with the aim that industries will start replacing foreign workers with Saudi youths. As a result, there has been a sharp decline in wages for expats as well.
The kingdom is now seeing expat dependents as a huge burden on the economy and one estimate claims that each expat costs the government roughly 1,500 riyals a month in terms of subsidies on water, electricity, gas and other essentials. There has also been the introduction of a levy placed on company’s who hire expats. The levy is worked out in relation to what portion of their total workforce is non-Saudi national, this helps determine the levy payable by the company.
It is important that all Expats located in Saudi Arabia, as well as the Middle East keep their finger on the pulse to monitor changing legislation, as other Middle Eastern countries could soon follow. Unsure of your current circumstances? It is important you review your current financial circumstances with a qualified financial planner to make the most of your time whilst overseas.