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Parliament approves bill substantially lowering taxes on foreign company profits

Parliament approves bill substantially lowering taxes on foreign company profits

Kuwait's Parliament on Wednesday passed a bill slashing taxes on profit of foreign companies in this oil-rich state from 55 percent to 15 percent, in a bid to attract investments to an economy aspiring to diversify its sources.
The 36-17 vote in favor amended a 1955 tax law, as requested by the Cabinet which saw the old legislation as a stumbling block to its plans to transform Kuwait into a regional financial and commercial hub.
Oil is the mainstay of the country's economy, largely dependent on government spending. Along with 50 lawmakers who make up the Parliament, 13 Cabinet members also have the right o vote in the assembly.
Finance Minister Mostafa al-Shemali told the assembly that Kuwait attracted less than US$300 million in foreign investments last year, compared to some US$18 billion for Saudi Arabia.
"This law will encourage foreign investors to enter Kuwait," lawmaker Ahmed Baqer, head of the parliament's finance panel, told reporters after the vote. "It's one of a package of economy bills that will turn Kuwait into a financial and commercial center."
He said the new, 15 percent tax on annual net profits for foreign companies was fixed, unlike the 52-year-old one of tranches that reached a maximum of 55 percent, according to company profits.
"This is a somewhat competitive percentage ... which is internationally acceptable," said economic analyst Ali al-Nemash. But he added much more is needed to lure foreign investors to a country known for being "consumer oriented" and for "exporting capital."
Investors complain of excessive red tape to set up businesses and visa restraints, which are much simpler in other Gulf states, such as the United Arab Emirates.
Most Kuwaitis work for a bloated public sector. Young graduates would rather wait for years for a government job _ long considered one way of distributing the oil wealth _ than work in a private company for less benefits.
Reforming the economy requires unpopular measures that would have to be sanctioned by parliament, including introduction of income tax, privatizing public utilities and shrinking the cradle-to-grave welfare system which Kuwaitis have taken for granted for decades, amid an oil abundance.
Kuwait has some 47 billion dinars (US$171.5 billion) of reserves, mostly in a fund for future generations that has been building since the 1970s by setting aside 10 percent of its annual revenues and investing them abroad.