December 2017 Chairman’s Message

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Dear Fellow ABGR Members,

Since last month, the Saudi firmament continues to shift under our feet as localization initiatives appear, a new Saudi Arabian General Investment Authority (SAGIA) leadership team shifts focus from regulation to investment promotion, Value Added Tax (VAT) implementation and energy sector privatization approach, civil nuclear plans take shape, the U.S. administration’s Middle East policy emerges, rule of law reforms advance and Riyadh Metro construction progresses.

The ABGR has over the past month been active on each of these historically consequential fronts, as follows:

  • Home of Innovation. A dozen ABGR members toured SABIC’s King Saud University campus showcase for new residential applications for petrochemicals and energy sustainability on November 12.
  • Value Added Tax. We may not all be quite ready for VAT, though thanks to a November 13 presentation by Rupert Pease of KPMG we are at least well-informed.
  • Speed-Networking. Some 70 members and friends got to know each other a whole lot better on November 20 at the Al-Nakhla Compound.
  • Saudi Electric Industry: Future Outlook. Dr. Abdullah M. Al Shehri, Governor, Electricity & Co-Generation Regulatory Authority. Infrastructure Committee Co-Chair AbdulRahman Al-Ghabban outdid himself in recruiting Dr. Al-Shehri to enlighten our general membership on November 28 on energy privatization and de-subsidization plans.
  • Rick Perry. On December 3, leading energy, petrochemical, infrastructure and power generation representatives prepared Energy Secretary Perry for his visit with the King, the Crown Prince and senior Ministry of Energy, Minerals & Industry and other officials.
  • Foreign Investment. 80+ of our members met on December 5 at SAGIA Headquarters with Deputy Governor Sultan Mofti and his team, regarding SAGIA’s progress in achieving Vision 2030 / NTP goals to localize production and raise foreign investment from 2.2% to 5.9% of GDP.
  • Policy Perspectives from the Afterlife. On December 6 former Acting Assistant Secretary of State for the Near East Stuart Jones of The Cohen Group enlightened 60 members with inside accounts of the President’s visits in May to Saudi Arabia and Israel, and the Administration’s more proactive Middle East policies.
  • Rule of Law. James Filpi of the Department of Commerce Commercial Law Development Program and Senior Judge Barrington Parker of the 2nd Circuit Court of Appeals on December 9 shared their experiences from a U.S. Government-funded alternative disputes resolutions initiative.
  • Riyadh Metro. On December 10 a group of 15 chosen by lottery were privileged to visit two stations on the Olaya Street Line, hosted by Project Consultant RMTC/Parsons and supported by Project Contractor BACS.
Tax Bill

We have in partnership with sister AmChams throughout the Gulf been active, through the Middle East Council of American Chambers of Commerce (MECACC), in promoting pro-business elements of the current tax bill, including a proposed shift from taxation based on citizenship for American companies and individuals to a residence- based system.

Mick Mulvaney, Director of the Office of Management and Budget, plans to visit Dubai, Bahrain and Riyadh February 19 – 24.  From his years as a Member of Congress Director Mulvaney has been MECACC’s friend and champion, supporting territorial-based taxation for individuals as well as corporations.

The House and Senate Bills are now in Conference Committee.  The Foreign Earned Income Exclusion (FEIE)[1] remains vulnerable, along with such formerly sacred cows as student loan interest, mortgage interest and state and local tax deductions.  While the FEIE is unlikely in this political environment to be expanded, it should as best we understand survive.

Some Americans abroad may benefit from the limitation of tax on pass-through entities to the new 20% corporate rate, which brings us closer to the 24% OECD average.  Basing corporate tax on residence only could represent a first step towards territorial tax for individuals.

Despite substantial lobbying and political clout many powerful and well-funded interests, including real estate agents, mortgage brokers, contractors, home builders and banks, all lost exemptions and exclusions; while taxation based on citizenship leaves us at a competitive disadvantage to most others, holding the line on FEIE may represent a first step towards expanding territorial treatment to individuals alongside corporations.

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Happy holidays to all; we look forward to ever bigger and better things in the new year.

Sincerely,

Christopher H. Johnson

Chairman

[1] Currently $104,200, subject to annual indexation.

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Chris Johnson

Chris Johnson, active in the Kingdom since 1978, is the founding partner of Johnson & Pump/Al-Sharif Law Office, based in Riyadh. chris@alshariflaw.com +966-11-462-5925