KUWAIT CITY, Jan 4: Kuwaiti economic experts have lauded the government’s decision to tax multinational companies, calling it a pivotal move for diversifying the country’s income sources. With the private sector having operated without taxes for decades, experts argue that this law will help spread the financial burden more equitably, ensuring the private sector contributes to the nation’s economic development. Economic expert Sultan Al-Jazzaf sees the tax as a positive step, noting that it has been carefully drafted to avoid excessive tax rates while targeting multinational companies earning significant revenues -- estimated at 750 million euros or more annually.

Al-Jazzaf emphasized that this move aligns with Kuwait’s long-term economic vision, ensuring the country is not overly reliant on a single source of income, such as oil. He added that this tax policy will also prevent Kuwaiti multinational companies from shifting profits to other countries with lower taxes, benefiting Kuwait from taxes that would otherwise go uncollected. Al-Jazzaf believes it is high time for the private sector to contribute more actively to the national economy, as the government has long supported its growth without imposing taxes. Al-Jazzaf further highlighted that the imposition of taxes will help alleviate Kuwait’s growing budget deficit, which is expected to persist for the next four years. By diversifying the state’s revenue streams, the tax will provide additional support to the national budget, aligning with the country’s efforts to ensure sustainable economic growth and financial stability.

Private companies, especially those profiting substantially from international markets, should be required to contribute fairly to the state’s financial health, according to Al-Jazzaf. Administrative expert Khaled Mohammed also praised the tax decision, describing it as a pioneering step. The law, which imposes a 15 percent tax on multinational companies operating in Kuwait, includes a range of provisions aimed at ensuring fairness and transparency. Article 4 of the law outlines exemptions for several entities, including government bodies and non-profit organizations, while Article 27 provides mechanisms for companies to challenge the tax if they believe they have been wrongfully assessed.

One of the key features of the law is its strong enforcement measures, including the ability to seize assets from non-compliant companies. This provision ensures that companies cannot evade the tax by manipulating the system, adding an element of prestige and rigor to the law’s implementation. Mishaal Al-Manea, Chairman of the Kuwaiti Society for Consumer Protection, also voiced support for the new tax, praising its role in promoting tax justice and enhancing Kuwait’s financial transparency. However, Al-Manea cautioned that the implementation of the tax could lead to higher costs in local markets, particularly for cooperative societies and businesses reliant on international companies for goods and services. The tax is expected to increase the cost of supplies, which could result in higher prices for consumers. If multinational companies pass these additional costs onto local suppliers and businesses, this could impact the purchasing power of Kuwaiti consumers.

Al-Manea stressed the importance of monitoring the implementation closely to ensure that consumers are not burdened by unnecessary price hikes. To mitigate the potential negative effects of the new tax, Al-Manea recommended that local businesses and cooperative societies enhance their collaboration with national suppliers to reduce reliance on international companies. He also suggested renegotiating contracts with suppliers to minimize the impact of increased costs on prices. Improving administrative efficiency within cooperative societies could further help reduce unnecessary expenses and ensure smoother operations. Al-Manea concluded by noting that while the tax presents an opportunity to achieve economic justice and boost state revenues, its success hinges on effective management. Close cooperation between the government, markets and cooperative societies will be essential to ensure the tax fulfills its objectives without undermining consumer interests or market stability In summary, the imposition of taxes on multinational companies in Kuwait is viewed as a strategic move to diversify the country’s sources of income, bolster the state budget and ensure long-term economic sustainability. However, the success of the policy will depend on its careful implementation, including measures to protect consumers and support the stability of the local market.

By Najeh Bilal
Al-Seyassah/Arab Times Staff