PINOY WORKERS IN SAUDI, UAE FACE HIGHER COST OF LIVING
Both countries plan to impose 5-percent value-added tax on most consumer goods next year.
Filipino workers in Saudi Arabia and the United Arab Emirates will have to brace for a higher cost of living as the two countries plan to impose a 5-percent tax next year on most goods and services to boost revenue after oil prices collapsed three years ago.
The value-added tax, or VAT, will apply to a range of items like food, clothes, electronics and gasoline, as well as phone, water and electricity bills, and hotel reservations.
Foreigners make up about a third of the Saudi population and far outnumber locals in the UAE. Both countries have long lured foreign workers with the promise of a tax-free lifestyle.
For now, anxious residents have been reassured that there are no immediate plans to impose a payroll tax, which could prompt an exodus of highly-skilled expatriate workers.
Saudi Arabia first introduced personal income, capital gains and corporate taxes in the 1950s, but within six months the law was revised to exclude nationals, according to the Oxford Business Group.
In the mid-1970s, during an oil boom and construction drive in Saudi Arabia, the country suspended income taxes on foreigners altogether to attract more expatriates to live and work in the country.
Even so, many residents in the Gulf say the cost of living is already high. Rent can easily eat up a third of income in places like Dubai.
Additionally, millions of foreigners across the Gulf send a significant portion of their salaries to relatives back home, leaving them with maybe a third or less of their salary to live off of each month.
“Five percent is, when you put it on top of everything, it will be a lot,” said Anna Carig, a pregnant school nurse from the Philippines. “Salaries are not coming up and so it will definitely affect everything.”
There will be some exemp- tions for big-ticket costs like rent, real estate sales, certain medications, airline tickets and school tuition.
Higher education, however, will be taxed in the UAE. Extra costs parents pay to schools for uniforms, books, school bus fees and lunch will also be taxed, as will real estate brokerage costs for renters and buyers.
Other Gulf countries are expected to implement their own VAT scheme in the coming years.
Stores, gyms and other retailers are trying to make the most of the remaining tax-free days in Saudi Arabia and the UAE, encouraging buyers to stock up before the VAT is rolled out on Jan. 1, 2018.
Even with a five percent jump in prices, the tax rate is still significantly less than the average VAT rate of 20 percent in some European countries.
“If you compare with Europe, I don’t think it’s as expensive. Only in rent and food,” said Vera Clement, a mother and assistant manager of restaurants from France who has lived in Dubai for three years.
The National newspaper, based in Abu Dhabi, says the cost of living in the UAE is expected to rise about 2.5 percent next year because of the VAT. Salaries, meanwhile, remain the same.
As the government adjusts to lower oil prices, the UAE is expected to raise around $3.3 billion from the tax.