Kathmandu, December 27

Saudi Arabia and the United Arab Emirates, the top destinations for Nepali migrant workers, plan to impose a five per cent value added tax (VAT) from next year on most goods and services. And, other Gulf countries are also expected to implement their VAT schemes in the coming years, international media have reported.

The imposition of the tax is expected to hit Nepal’s remittance inflow as the cost of living would increase and the migrants’ savings would decrease.

“Remittance will definitely take a hit as Nepalis living there will be saving less,” said Rohan Gurung, chairman of Nepal Association of Foreign Employment Agencies.

Gurung said the government should make diplomatic efforts to address this issue as remittance is the biggest foreign currency income source of the country. “We might not be able to directly ask them not to impose the tax, but there are several other diplomatic measures the government could take to ensure that the Nepalis living there do not suffer,” he said.

Nepal receives around $7 billion in annual remittance from various labour destinations, while more than 4.5 million Nepali migrants are currently working in Gulf counters, according to official records. More than 1,000 Nepalis leave for foreign employment every day.

Aimed at boosting revenue after the oil price collapse, the 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.

Costs like rent, real estate sales, certain medications, airline tickets and school tuition would be exempted, but higher education will be taxed in the UAE, according to an Associated Press report.