US embassy cable - 05KUWAIT4546

UNCLAS KUWAIT 004546 
 
SIPDIS 
 
STATE FOR NEA/ARPI SWALKER, LONDON FOR LTSOU 
 
E.O. 12958: N/A 
TAGS: PREL, PGOV, KU, KFIN 
SUBJECT: FINANCE MINISTRY ON TAX REFORM AND THE REJUVENATED 
OFFSET PROGRAM 
 
1. (U) Summary.  In an October 22 meeting with Econ 
Counselor, the Acting Undersecretary at the Ministry of 
Finance confirmed the resumption of the Offset Program and 
the GOK's efforts, spearheaded by the Kuwait Investment 
Authority (KIA), to establish a private company tasked with 
administering the Program.  Al-Shamali also said that the 
National Assembly would begin reviewing the new tax reform 
measures, as part of the GOK's efforts to overhaul the 
country's outdated 1953 tax law.  End Summary 
 
2. (U) On October 22, Econcouns, accompanied by Econoff, met 
with Mustafa Al-Shamali, Acting Undersecretary at the 
Ministry of Finance, to discuss taxation procedures impacting 
U.S. companies with business interests in Kuwait and confirm 
the re-activation of the GOK's Offset Program as contrary to 
WTO obligations. 
 
3. (U) On taxation, Al-Shamali acknowledged that Kuwait's 
1953 tax law was outdated and that a new comprehensive reform 
package was before the National Assembly for review and 
approval.  He added that a lower tax rate of 25 or perhaps 15 
percent would replace the current 55 percent rate established 
by the 1953 law applying only to foreign companies operating 
in Kuwait.  However, Al-Shamali was not optimistic about 
timely National Assembly approval of the new legislation, 
commenting that the reform measures were "not popular" and 
that approval "will take some time."  He explained that the 
new law would establish taxable income standards for all 
entities, including Kuwaiti citizens, who are presently 
exempt from paying personal income tax. 
 
4. (U) On the rejuvenated Offset Program, Al-Shamali 
confirmed that the GOK had reinstated the Program and that 
KIA was tasked by the GOK to establish a private company to 
administer the Program and relieve the Finance Ministry of 
administrative responsibilities.  Al-Shamali does not 
consider the Program to be inconsistent with WTO obligations, 
pointing out that other WTO member states also have similar 
programs and that the World Bank had deemed the program 
consistent with WTO obligations. 
 
********************************************* 
Visit Embassy Kuwait's Classified Website: 
http://www.state.sgov.gov/p/nea/kuwait/ 
 
You can also access this site through the 
State Department's Classified SIPRNET website 
********************************************* 
LEBARON