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Conditions make VAT an unsuitable revenue source for Kuwait
March 14, 2018, 9:10 am
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Implementation of the tax system requires a rich business environment that provides sufficient tax revenues, but this environment does not exist in the country, reports Annahar daily quoting Supreme Council for Planning Member and former Board Chairman of Gulf Bank Ali Rashid Al-Badr.

Speaking to the daily, Al-Badr warned the consumers will bear the consequences once the value added tax (VAT) is implemented. He said most citizens depend on salaries and pensions, so it is expected that they will demand for salary increment.

He asserted such demands will be endorsed by lawmakers who will put pressure on the government to grant the increase. Eventually, the government will succumb to pressure and the salary increment will eat up tax revenues, he added.

He argued the implementation of tax will increase the government’s expenditures due to the need to hire a large number of accountants, auditors and lawyers.

He stressed the State controls 75 percent of the economy and it has no intention to give up its huge share in favor of the private sector just to develop the business environment. He said the government floated tenders which are not attractive for investors because the expected return is very low.

He added most of the projects are nothing more than covered borrowing; in other words, the government floats tenders for the private sector to implement projects instead of asking for loans directly. He also criticized the Build- Operate-Transfer (BOT) system as it kills investments.

He pointed out many investors want to be involved in permanent projects which can be developed and handed over to their successors, while the BOT system gives investors the opportunity to manage projects within a certain period but these projects will eventually go back to the State.

 

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