An Evaluation of the Proposed Kuwaiti Income Tax Law: A Theoretical Study

Abstract

The objective of this study is to evaluate the income tax project submitted to the Kuwaiti National Assembly in August 2004. Content analysis methodology is used to evaluate the fairness, flexibility, and the consistency of the proposal with the cost-benefit analysis principle. The results indicate that the individuals income taxes system is not a uniform tax system regardless of the dominance of this system in other countries in current practice. In addition, the results indicate that it is not advisable to treat partnership as a separate legal entity's different from its owners as this is inconsistent with current accounting concepts and practices and recommends considering the partners as the taxable units rather than the partnership. The study recommends the relief of governmental and business units from reporting to the income tax department the transactions with the tax payers to protect the client's privacy and to save the cost of reporting. Also, the study recommends decreasing the monthly delay fine from 1% to .5%  and to rename it 'delay expenses'. The tax project decreases significantly the tax rates compared to decree No 3 for 1955 in order to encourage foreign and local investments and gives significant tax exemptions to the individuals.