KUWAIT: Finance ministry sources said the application of value added tax in Kuwait during the current circumstances will be widely rejected at the popular and parliamentary levels. The government has excluded it from its plans during the next three years at least, indicating it will resort to the application of excise tax instead of VAT as its first choice for tax collection.
“The application of excise tax will include tobacco and its derivatives, soft and sweetened drinks and luxury goods such as watches, jewelry and precious stones, as well as luxury cars and yachts,” sources revealed to Kuwait Times, pointing out the value of the proposed tax on these goods will range between 10 and 25 percent. The sources added the government wants to apply VAT in accordance with its agreement with Gulf Cooperation Council countries, but it must be approved by the National Assembly, which is currently difficult in light of popular and parliamentary rejection.
“With intensifying inflation fears, which have recorded historical levels in major industrialized countries, its effects bounce back to Kuwait and the region. Moving forward with such a type of tax in the present time may result in sharp rises in prices that cannot burden the consumer,” sources added. The sources reported in the event of the application of excise tax, the state treasury will earn around KD 500 million annually, noting it does not affect incomes of low- and middle-income people, as it targets luxury goods that are not considered to be basics for living.
“It will also be applied to goods harmful to health as is the case in developed countries, given the government spends a lot of money on programs and treatments for cardiovascular diseases, obesity and diabetes resulting from smoking, soft drinks, energy drinks and others,” he said. The Cabinet requested the ministry of finance develop tax administration across all key required areas, such as taxpayer readiness, human resources and training, communications, operations and information technology.
It is worth mentioning that according to the Gulf agreement signed by Kuwait in November 2016, “excise tax will be applied to tobacco products of all kinds and forms, on energy drinks by 100 percent and soft drinks by 50 percent, while value-added tax has been set at 5 percent added to the value of goods at the moment of sale and collected for the benefit of the state treasury”.