KUWAIT MOVES TO CUT FOREIGN CORP TAX RATE

UNCLAS KUWAIT 002922

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EPET KU EIVN
SUBJECT: KUWAIT MOVES TO CUT FOREIGN CORP TAX RATE



1. (U) The Financial and Economic Affairs Committee of the
Kuwait National Assembly voted out of committee on June 26
the GOK's proposal to amend Tax Law 3-1955 to reduce
corporate tax on foreign firms from 55 to 15 percent of
profits. Kuwaiti-owned corporations currently pay no tax and
their status would not change under the new law. The 55
percent tax rate was instituted in 1955 to capture revenues
from foreign-owned enterprises operating in Kuwait, which
were almost exclusively energy-related at that time. Today,
the proposal is expected to net considerable revenues from
non-oil activities, according to Committee sources.


2. (U) Local papers quote Labeed Al-Abdal, Chairman of the
Legal Committee, as predicting that the eventual passage of
the proposal would boost Kuwait's standing as a regional
financial center. He characterized the action by the
Financial and Economic Affairs Committee as testimony to
Kuwait's commitment to take "into consideration the
requirements of our competitive economic environment ... and
the significance of not only reducing the tax rate but also
attracting foreign investments." Other of the GOK's
proposals tied to the corporate tax law, most notably a
provision to tax Kuwaiti-owned enterprises as well, were
stripped from the final proposal endorsed by the Committee.


3. (U) In voting out its bill, ironically the Committee
recommended that the government speed up the process of
approving amendments to the corporate tax law, as well as
consumer protection and anti-monoply laws. Unfortunately,
the Committee's own action occurred late in the game for this
parliamentary session. The National Assembly closed on June
29; the Committee's tardiness in approving the bill for
Assembly-wide vote delays further action until the
legislature convenes in mid September.
TUELLER