Kuwait mulls to impose income tax on national companies

Kuwait Ministry of Finance logo.

Kuwait City: Kuwait's finance ministry is preparing a proposal to impose income tax on "national firms" to help boost government revenue, Finance Minister Sheikh Salem AbdulAziz Al-Sabah said.

"The government may adopt proposals to extend the current corporate income tax to include Kuwaiti firms besides the foreign firms," Sheikh Salem said in an e-mailed response to questions. The ministry is also coordinating with authorities in the Gulf Cooperation Council (GCC) "for the development of the value added tax, which has seen good progress so far."

The proposal is likely to face opposition from within the government and parliament, should it reach that stage, Jassim Al-Saadoun, head of Kuwait-based Al-Shall Economic Consultants, said by phone. Foreign companies in Kuwait pay a 15 per cent tax. Kuwait's benchmark SE Price Index for stocks was little changed at 11am in the capital Kuwait City.

Sheikh Salem, who resigned as central bank governor in 2012 criticising the government's spending policies, is an advocate for fiscal discipline in the oil-rich nation. He faces a parliament that this year passed a law requiring the government to pay KD744 million ($2.6 billion) to purchase citizens' loans taken before March 30, 2008.

'Bargaining power'
"The idea isn't new, but I don't think the bargaining power in the hands of the government is good enough to adopt it again," Al-Saadoun said.

Sheikh Salem's remarks come more than a month after Prime Minister Sheikh Jaber Al-Mubarak Al-Sabah urged citizens of the oil-rich country to reduce their reliance on an "unsustainable" welfare state. Since then, the government has formed a committee to review subsidies on goods and services.

Spending on subsidies
Spending on subsidies has increased more than fourfold in the nine fiscal years to 2012-13, said Sheikh Salem, a former central bank governor. "Future scenarios of subsidies show that they would put substantial pressures on public revenues."

The International Monetary Fund has repeatedly urged members of the six-nation GCC, which also includes Saudi Arabia and the United Arab Emirates, to reduce energy subsidies, as rising public spending pushes some governments toward posting budget deficits. The Middle East and North Africa accounted for about 50 per cent of global energy subsidies in 2011, according to an IMF study released this year.


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