For the longest time, the Middle East has been a top prospect among foreign jobseekers from all parts of the world, mainly due to the fact that they earn tax-free income, among others.
However, with the burgeoning troubles faced by the oil industry, which these countries are most known for, governments in the region are looking of other channels of revenue that could support the economy as well as sustain the countries’ budget demands – one of which is through the implementation of value-added tax (VAT).
Kuwait Aims to Introduce VAT at Start of Fiscal ’21-’22
In relation to this, a recent economic report has revealed that value-added tax (VAT) is set to be implemented in Kuwait at the beginning of the fiscal year 2021/2022, which begins on the first of April 2021, as shared in a report by Annahar Daily.
However, the fees on tobacco and soft drinks will be introduced in 2020/2021, starting in April 2020. Along with this, there will be a slight increase to be expected in government fees for services, as well as some additional rationalization in current spending practices.
Based on the report, the non-oil sector is predicted to raise a contribution of 12.5 percent as a proportion of the GDP in fiscal 2024/2025.
According to the report of the Ministry of Finance Economic Team for March 2019, citing the International Monetary Fund (IMF), they noted that the balance of the general budget of the state will drop by about 9 percent in anticipation of the decline in oil revenues from current levels.
The IMF explained that in order to address Kuwait’s financing needs, the main indicator of measuring the financial balance after deducting the share of future generations and excluding investment income would put 12.5 percent of GDP in a financial deficit, which, according to IMF estimates KD 35 billion equivalent to $116 billion in the coming years, and is expected to extend from 2019/2020 until 2024/2025, or about 5 financial years.
Furthermore, the report identified that the financing of these needs is distributed between the withdrawal of reserves and domestic and external borrowing.
This being the case, the government is now looking for viable means to produce income outside of its long-term dependence on oil reserves, and that would be by boosting other sectors such as tourism and the implementation of VAT based on the terms set by the GCC, following the UAE and Saudi Arabia’s footsteps.