Kuwait approves corporate tax

This July 19, 2009 file photo shows the Kuwait city skyline. (AP)

Kuwait’s cabinet has approved economic reforms including the introduction of a 10 percent tax on corporate profits to narrow a budget deficit caused by low oil prices, Finance Minister Anas al-Saleh said on Monday.

Saleh, speaking at a news conference, did not say when the tax would be imposed. But it would mark a big shift in policy; at present, most Kuwaiti firms do not pay taxes on profits, though many foreign firms do.

All of the wealthy Gulf oil-exporting states are scrambling to cut their deficits by boosting non-oil revenues, but most are taking a different approach than Kuwait, focusing on the introduction of a value-added tax from 2018 rather than on taxing corporate earnings.

Saleh also said the cabinet had approved a "repricing" of some commodities and public services. He did not elaborate, but his comment appeared to refer to cuts in price subsidies for fuel, food and public utilities.

Officials have previously said they are considering such cuts, but the issue is politically sensitive because it could directly affect the living standards of Kuwaitis. The subsidies cost the government billions of dollars annually.

The finance ministry projected in January that because of low oil prices, the government would run a deficit of dinars $40.7 billion in the fiscal year starting on April 1, nearly 50 percent higher than the deficit estimated for the current year, after government contributions to the sovereign wealth fund.

The red ink has increasingly alarmed officials. The emir has urged the cabinet and parliament to cut spending, and the central bank governor warned this week that authorities might have to change monetary policy if the deficit was not cut.

Saleh also said on Monday that the government would seek to privatize state-owned assets including airports, ports and some facilities of national oil giant Kuwait Petroleum Corp.

In a report to the cabinet, he outlined other reforms including allowing private citizens to own as much as 50 percent of public-private joint ventures, reforming the labour market and the civil service system, and making the public sector more efficient by linking pay to production, state news agency KUNA reported.

Last Update: Wednesday, 20 May 2020 KSA 13:57 - GMT 10:57