No VAT Implementation in Kuwait Before 2021 – Here’s Why!

According to the budget committee of the parliament, finance ministry seems to be in need of expediting actions in order to excise tax on goods. The next session of parliament will start from October 2018, in which excise tax will be approved. Kuwait, which is no doubt one of the emerging countries won’t be implementing VAT (value-added tax) before 2021, however, it will introduce the excise tax, as it was already made clear in a recent statement which was posted on the website of assembly. Also, VAT in UAE was implemented at the beginning of this year.

Without elaborating, the statement said that according to the committee, the implementation of the VAT is going to be postponed ‘til 2021. The statement also said that for the finance ministry, there seemed to be a need of expediting some measure in order to excise tax on few products like; carbonated drinks, tobacco etc.

VAT Implementation — Gulf Arab Countries

Originally, six wealthy and affluent Gulf Arab countries that are well-known as they export oil have agreed on introducing VAT at a 5% rate including the top ones; United Arab Emirates (UAE) and Saudi Arabia. As it’s already mentioned above, VAT in UAE has been already implemented and the requirements for VAT registration in UAE have been also made public.  However, the remaining four countries delayed as there is domestic political opposition and many technical challenges are also involved in the new taxation. Plus, these four countries didn’t announce any official date when they will impose VAT.

As it’s already known to many that the most powerful and influential parliament in the region is in Kuwait, the desire of budget committee to delay VAT seems to be right, even though the officials of the cabinet have asked for a speedy taxation system as well as expenditure reforms.

Revenues from New Tax

If we talk about the revenues from the new tax, it could be extensive.  According to IMF’s (International Monetary Fund) estimation, VAT in the United Arab Emirates will profligate almost 1.5% of the gross domestic product. However, as it is already mentioned above that the state finances of Kuwait are amid the strongest and powerful ones in the region — within the last several months the price of oil has increased which clearly shows that the government of Kuwait has very little immediate need of other revenues.  Also, Gulf governments seemed to be agreed on introducing an excise tax on products like carbonated/sugary drinks and tobacco – raising much less money as compared to the VAT. On Monday, the finance minister of Kuwait said that according to his anticipation, the excise tax will be approved by the parliament in October, during its next session.

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