FINANCE MINISTRY ON TAX REFORM AND THE REJUVENATED

UNCLAS KUWAIT 004546

SIPDIS

STATE FOR NEA/ARPI SWALKER, LONDON FOR LTSOU

E.O. 12958: N/A
TAGS: PREL PGOV KU KFIN
SUBJECT: FINANCE MINISTRY ON TAX REFORM AND THE REJUVENATED
OFFSET PROGRAM


1. (U) Summary. In an October 22 meeting with Econ
Counselor, the Acting Undersecretary at the Ministry of
Finance confirmed the resumption of the Offset Program and
the GOK's efforts, spearheaded by the Kuwait Investment
Authority (KIA),to establish a private company tasked with
administering the Program. Al-Shamali also said that the
National Assembly would begin reviewing the new tax reform
measures, as part of the GOK's efforts to overhaul the
country's outdated 1953 tax law. End Summary


2. (U) On October 22, Econcouns, accompanied by Econoff, met
with Mustafa Al-Shamali, Acting Undersecretary at the
Ministry of Finance, to discuss taxation procedures impacting
U.S. companies with business interests in Kuwait and confirm
the re-activation of the GOK's Offset Program as contrary to
WTO obligations.


3. (U) On taxation, Al-Shamali acknowledged that Kuwait's
1953 tax law was outdated and that a new comprehensive reform
package was before the National Assembly for review and
approval. He added that a lower tax rate of 25 or perhaps 15
percent would replace the current 55 percent rate established
by the 1953 law applying only to foreign companies operating
in Kuwait. However, Al-Shamali was not optimistic about
timely National Assembly approval of the new legislation,
commenting that the reform measures were "not popular" and
that approval "will take some time." He explained that the
new law would establish taxable income standards for all
entities, including Kuwaiti citizens, who are presently
exempt from paying personal income tax.


4. (U) On the rejuvenated Offset Program, Al-Shamali
confirmed that the GOK had reinstated the Program and that
KIA was tasked by the GOK to establish a private company to
administer the Program and relieve the Finance Ministry of
administrative responsibilities. Al-Shamali does not
consider the Program to be inconsistent with WTO obligations,
pointing out that other WTO member states also have similar
programs and that the World Bank had deemed the program
consistent with WTO obligations.

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LEBARON