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Row over contracts, income tax
KUWAIT CITY, Dec 23: A controversy broke out involving the State Audit Bureau and the Kuwait Oil Company (KOC) concerning an amount of KD 82 million, which the bureau believes KOC had wasted from the public funds by not paying the contractors, who are entrusted with the implementation of contracts, the taxes due on their contracts. KOC stressed that this is not true, as it does not have the right to exempt or induce any contractor to refrain from paying the rights of the state, reports Al-Rai daily quoting informed sources.
They explained that KOC had signed four contracts with foreign companies for the provision of consultancy and technical services for the oil wells in the south and east of Kuwait in 2016. It was a commercial mechanism seen in any agreement negotiated between the company and the advisor, as a kind of consensual compensation for the tax paid. There is no ambiguity in that, as the principle of contractual obligations is the agreement between the two parties, and can even go beyond that to the extent that the two parties can mitigate the terms of liability arising from the contract, and even be completely exempt from it. From a legal point of view, the tax prescribed for the state was fulfilled according to the law, and the contractor obtained a proof of this, and he was not exempted. KOC does not have the ability to exempt anyone from paying or incite to refrain from paying the state tax.
The sources said the controversy is related to four consultancy contracts and the income tax due on these contracts entrusted to contractors. They stressed that the advisory contracts are not executive and cannot be compared to traditional contracts, affirming the keenness of KOC to ensure its contracts with international oil companies include all guarantees by working within a clear scope of work, pre-defined work and specific tasks.
Regarding the Kuwaitization of contracts, the sources indicated that the oil sector is exerting great efforts to increase the Kuwaitization rates in companies and contractors, adding that it is continuing to implement this policy in a thoughtful manner to ensure there is no defect in the technical work system. They explained that there are specialized sectors such as the drilling sector, which is one of the rare specialized jobs in the local market and is difficult. The pattern of work requires staying in remote areas and in harsh weather conditions for a period of 21 days per month, with a 12-hour daily working period in the open. Sudden termination of contracts will negatively affect production capacity, and will inevitably lead to a decline in Kuwait’s share in the global market, as the drilling sector is the main tributary to maintain and raise production capacity.