The Discourse of Remittances in the Countries We Study
- • India: Given the huge amount of remittances that Indian expatriates send back to India, the discourse of remittances has largely been a positive one. Indian government officials see this both as a tool for development as well as one that contributes to the Indian economy, more generally. The Non-Resident Indians (NRIs) are wooed by the Indian investment sector as well as government, as cash-rich investors. This phenomenon has become salient over the past few decades. We will examine some of the changes in this discursive shift over the past decades in this paper.
- • U.S.A.: As the world’s largest economy and one of the most favored destinations for migrants, the U.S. still retains obvious advantages that other countries do not when it comes to earning money and repatriating those funds to other countries. Given the freedoms that exist both in wealth creation and in sending money outside of the
Photo 6.1 Migrant workers in Californiacountry, the U.S. capitalist framework has created a generally conducive and positive discourse regarding remittances.
- • Saudi Arabia: With a presence of a large number of migrant workers from South Asia, Saudi Arabia has been a magnet for remittances. While in the past decade or so, there has been talk of ‘Saudization’ policy, of replacing the foreign labor with Saudi workers, the overall trend has still been positive. The leaders and media in the Kingdom realize that they need the migrant labor to keep the economy going and there needs to be a conducive work environment for these workers to thrive and do well. We will see how this trend has changed over the years and what it means for migrant workers from South Asia living and working in the Kingdom today.
- • Mexico: Mexican remittances are shaped by two forces: internal discourses in the country and policy frameworks—including banking regulations in Mexico and secondly, the regulations in terms of sending money and state of the economy in the US. This complex dynamic has been in flux for several decades and has also impacted migration to the U.S.
How Current Policy Discourses May Shape Remittance Behavior: Saudi, India, and Mexico
Some developed countries—remittance-sending countries—are considering taxing remittances. According to a new report by The World Bank’s KOMAD, this is being considered by countries such as Bahrain, Kuwait, Oman, Saudi Arabia, the United States of America, and the United Arab Emirates (UAE). Malit and Nofal in their explanatory note on the issue point this out and explain that the dropping oil prices and warnings from several quarters including the IMF indicate the region has to buckle up and ensure there is financial liquidity in the years to come. This has led the governments to think of various means of taxing the resident—often non-citizen—populations (Malit & Nofal, 2016).
This includes the proposals for introduction of new income tax as well as other forms of value-added taxes that might boost revenues for the government. There is a general consensus among the ruling elite that remittance flows out of the Gulf countries are bad for the local economies, Malit and Nofal point out. However, there is proof to the contrary, they assert. They add that:
In the GCC countries, remittance outflows are seen as leakages of money that could be otherwise circulated and invested in the domestic economy. Therefore, large remittance outflows prompted the GCC governments to seriously consider introducing taxes on money transfers. In fact, only one existing empirical evidence suggests that remittance outflows can actually be beneficial to local economies due to their ability to “exert deflationary pressures on inflation in GCC countries.”
The GCC region is one of the most significant when it comes to remittances origin. As Malit and Nofal explain, about 23% of the world’s $400 billion USD remittances came from this region and this figure of $90 billion is quite significant. The Kingdom of Saudi Arabia, with $34 billion, came first followed by the UAE. The countries in the Gulf are beginning to see this outflow as a potential source of revenue, given that that average remittance per month from the remitter is about $320.
The proposed policy change in taxation is being suggested to address the budget deficit of these countries. But this could have a negative impact on the labor flow, especially among the lower income segment, the authors of the World Bank report point out. World Bank estimates also show that there has been a dip in flow of remittances in the years since 2017, given the impact of migration policies in the US. Though the region is different, the impact on migration policy, labor flow can have an adverse impact on remittances as well (World Bank, 2017).
This phenomenon of imposing taxes on remittances, coupled with the increased drive to hire locals—the policy of Saudization for instance—can
Photo 6.2 A welcome sign in Oaxaca, Mexico
Discourse of Remittances 87 have adverse impact on the country. Given that Saudis tend to avoid low paying jobs, there is a danger that the expatriate population that works in these Gulf countries may not find the incentives to work in the country if there is the extra burden of taxation, critics have argued.
It is interesting to note that there is no consensus among the ruling elite about the need for greater taxes, even though there is a need for increasing the tax base. There is fear that this new tax may deter potential employees from picking these countries as destinations. The diplomatic costs involved—with the existing agreements being impacted by new taxes—are a very real fear that most GCC countries have.
In the U.S., there are a few states that tax remittances. Currently, Oklahoma taxes remittances and Georgia and Iowa are considering taxes that are wider in scope (Cuevas-Mohr, 2019).