KUWAIT, 28 May 2006 — Kuwait’s Cabinet will study a proposal to introduce income tax for the first time in the Gulf Arab country, a finance ministry official and state media said yesterday. “This is a comprehensive law, it covers every kind of income without regard to the nationality of the tax payer,” a senior Finance Ministry official told Reuters. “So everybody generating income in Kuwait will be taxed a flat rate of 10 percent,” he added.
State news agency KUNA said Cabinet committees are expected to study the draft law and then refer it to the next Parliament term. Parliament has been dissolved but a new assembly, to be elected on June 29, will have the right to vote on bills passed after the dissolution of its predecessor.
Kuwait, a country of about 2.7 million people, including about one million Kuwaitis, does not collect income taxes from citizens or expatriate workers.
The OPEC oil producer controls nearly a tenth of global petroleum reserves and oil sales account for up to 50 percent of GDP and up to 90 percent of state revenue. Kuwait is expected to log a budget surplus of some $24 billion in the fiscal year that ended March 31, 2006.
Finance Minister Bader Al-Humaidhi yesterday sent to the Cabinet the comprehensive tax law drafted after economic studies were carried out by a Dutch financial institution in accordance with international criteria and Kuwaiti law, KUNA added.
“Financial and economic reform cannot be achieved without developing the tax system similarly to what is being applied in both industrial and developing countries,” Al-Humaidhi told the Cabinet in a statement.
The agency said the new draft law “aims to provide a suitable investment climate in Kuwait, restructuring public finances and supporting economic development”. It also envisages “establishing social justice ... organizing the tax ties between Kuwait and other countries and reforming the current income tax law”.
On Wednesday, the Cabinet approved a bill that would slash tax on foreign firms to a flat 15 percent from current levels of up to 55 percent.
The bill will be sent to a legal committee before ratification by the emir. Kuwait does not tax the profits of local firms. Under a 1950s law foreign firms pay up to 55 percent tax.
