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Govt support costs constitute second challenge in budget
KUWAIT CITY, Dec 1: Although taxes are not mentioned in the government’s work program except on the profits of local and foreign companies operating in Kuwait and through a draft law that the government will submit after a year or two, there is popular and parliamentary fear and resentment over imposing taxes on citizens, which raises an important question: Does Kuwait need to impose taxes?, reports Al-Qabas daily. Moreover, if we look at the financial situation of Kuwait and the various aspects of government spending, we will find that the value-added tax at a rate of 5% and the selective tax will accrue to the state treasury with very few revenues and will not even constitute 2.5% of the total government spending.
At the same time, it will cause the loss of a competitive advantage for Kuwait among the Gulf Cooperation Council countries and inflation in prices, which will result in popular demands that cost the state many times the sums collected from the tax itself.
Therefore, it can be concluded that taxes on purchases are not in the financial interest of the state. As for taxes on income or corporate profits in particular, it is a tax that can be easily evaded legally and accounting if it is applied at high rates by reducing profits as much as possible, and therefore it will be an obstacle in Kuwait’s direction towards the financial and commercial center without any significant benefit. The most important types of taxes can be divided into taxes on purchases, such as value-added and selective taxes, and taxes on income, such as tax on corporate profits, etc. Finally, taxes on wealth or assets are paid annually and are in very small percentages of the value of the asset or property. What Kuwait actually needs is to reduce spending on salaries by encouraging the private sector and foreign investors to employ citizens and income taxes cannot encourage that.
The question is: Does Kuwait currently need any new tax, whatever its name? On the other hand, we find that government support costs constitute the second challenge in the budget after salaries, so is it logical to impose taxes on companies that can be easily evaded, and they, that is, companies, receive at the same time a large subsidy from the state in energy and others? Isn’t it more beneficial to reduce government subsidies instead of imposing taxes? Far from theorizing and far from attempts to copy economic models that are not in line with Kuwait’s current situation, there is no practical evidence that imposing any kind of new taxes will be in the financial interest of the state before many other reforms are undertaken.