Saudi Arabia's Shura Council has rejected a move to impose tax on the income of individual expatriate workers in the public and private sectors, a report said.

The council made the decision after hearing the arguments for and against the proposal, Shura secretary-general Dr Mohammed Al-Ghamdi was quoted as saying by the Arab News report.

The move could not attain the requisite majority in the house, he said.

Supporters of the tax proposal felt the tax will help bridge the gap between the wages of Saudis and non-Saudis and increase the chances for locals to work in the private sector, the report said.

Both Saudi and expatriate employees working in the Kingdom had to pay income tax until it was abolished in 1975. Later, there were moves to reintroduce income tax on foreigners in the late 80s. However, in 1988, King Fahd scrapped the plans, the report said.

At present, only Saudi citizens and Saudi companies need to pay Zakat of 2.5 percent annually on profits and on the assessable amount for individuals, in addition to a tax on foreign investors.

In a bid to attract more foreign investment into the Kingdom, the government slashed in 2004 the tax rate imposed on foreign investors from 45 to 20 percent, it said.