By Hanan Al-Qaisi and Talal Al-Sanafi
Kuwait, Nov 25 (KUNA) -- Kuwait submitted Sunday a paper, regarding tax legislations and Islamic financial tools, to the fourth Technical Conference of the Association of Tax Authorities of Islamic Countries (ATAIC).
Speaking to Kuwait News Agency (KUNA), head of Kuwait's delegation and Director of Finance Ministry's Tax Imposition Department Hamed Al-Nasser said the paper included a number of issues, such as explaining tools utilized by Kuwaiti financial bodies with the Kuwait Finance House (KFH) as an example.
This paper, he said, was aimed at getting familiarized with the expertise of nations applying taxes on Islamic bodies.
The paper noted that Kuwaiti legislations did not apply any tax on Islamic monetary tools being utilized by Islamic financial bodies, but their realized profits were subject to the national labor support tax issued in 2000.
It also pointed out Kuwait's efforts to issue a comprehensive tax law that took into consideration the nature of Islamic financial tools.
Since the 1980s, Kuwait's interest in issuing such a law has increased and some drafts were devised, but they did not receive legislative support because of Kuwait's distinctive conditions, said the paper.
It added that some legislations relevant to tax laws affecting economic activities were issued.
It outlined problems relevant to applying decree number three of 1955 regarding income-tax as practical application has shown a number of problems relevant to social and economic developments in Kuwait, as well as changes relevant to tax laws in other nations.
Such things have made Kuwait incapable of attracting and encouraging Kuwaiti capitals or keeping up with developed financial structures in other nations as the application problem was relevant to the law being related to petroleum taxes and it was improperly translated.
Other problems were relevant to the law only being applied on foreign firms without local companies, which has led to not having proper awareness about taxes in Kuwait and social obstacles have hindered tax reforms.
The law, added the paper, did not include any incentives or exemptions for desired social or economic goals, noting that the 55 percent tax rate led to either tax evasion or foreign companies avoiding investments in Kuwait.
The paper suggested reforming the current tax system, developing proper conditions for investment, amending the structure of public finance, as well as regulating tax ties between Kuwait and other nations.
It noted the significant role of law number 19 of 2000 regarding supporting national labor to work in the private sector, which has proven a success in lowering unemployment rates and demand on government jobs.
As for application obstacles, the paper said Finance Ministry faced a number of obstacles in implementing the law and collecting the tax due to not having a bylaw explaining the law's applications, determining net profit and collection mechanism.
The paper presented the activities of Kuwait Islamic financial bodies operating to serve Muslims through fulfilling social and economic development.
Financing at those institutions is through profit-sharing (Mudharabah), cost-plus (Murabah) and other tools allowed by Islamic laws, said the paper.
It noted the distinguished achievements of KFH that utilized direct and indirect investment tools complaint with Islamic guidelines.
As for the possibility of double taxation between Zakat (almsgiving) and state taxes, the paper said most private investments were subject to little tax, so KFH did not have any problems when it came to paying it state taxes and Zakat at the same time.
