Kuwait should consider introducing income, corporate and sales taxes to compensate for revenue lost from the plunge in oil prices to their lowest level since 2003, Finance Minister Anas Al-Saleh said on Thursday.
The oil-exporting state should also ponder raising the cost of public services and cut government spending, Al-Saleh said, according to a statement released by the Finance Ministry.
The Kuwaiti Amir, Sheikh Sabah Al-Ahmed Al-Sabah, already signaled on Wednesday that belt-tightening was in his country’s future when he urged parliament to cooperate with the government to pass laws to reduce the budget deficit.
The Kuwaiti stock exchange index fell 1 percent as of 9:40 am, bringing the index to a 26 percent drop over the past 12 months. Parliament must ratify all legislation related to state spending and revenue.
Kuwait is the latest country to consider a departure from the spend and no-tax practices common in the Persian Gulf region. Saudi Arabia, the world’s largest oil producer, and other oil-rich Arab nations have already cut spending and discussed introducing taxes for the first time to shore up finances. Kuwait’s oil revenue dropped by 45 percent in the first 11 months of 2015, with Brent crude prices falling 22 percent in the same period.
The drop in state revenue is taking a toll on economic growth. HSBC revised its projections for Kuwait’s 2016 economic growth to 1.9 percent from 2.1 percent. The nation could register a budget deficit this year, after surpluses as high as 35 percent in recent years, according to HSBC.
The government and the people “must shoulder their responsibilities to reduce spending,” Al-Sabah said Wednesday in remarks carried by state-run Kuna news agency.
Source: Arabian Business