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Volume :27 Issue : 1 2020      Add To Cart                                                                    Download

The Perception of Kuwait’s Residents Regarding the Introduction of Tax Systems and Reducing the Current Subsidies

Auther : Barrak G. Algharabali

Purpose: The oil price decline has left Kuwait in a vulnerable financial situation. Should the Kuwaiti government ultimately consider taxes when diversifying revenue sources? This research assesses the perceptions of Kuwait’s residents regarding several tax options, as well as the factors that affect these perceptions.
Study design/methodology/approach: The study relies on primary empirical data to allow conducting regression modeling as the instrument for the data analysis. The analysis helps to identify the tax options that are mostly accepted by the residents of Kuwait. It also helps to understand whether or not Kuwait’s residents prefer the option of having taxes in order to diversify the national budget, or whether they prefer the option of reducing the subsidies that they are currently getting from the Kuwaiti government to help reduce expenditures in the national budget, which could contribute to resolving the deficit issue.
Sample and data: The research relies on primary empirical data gathered through an online survey questionnaire: 4,181 individuals began the survey, and 3,370 respondents finished it (a completion rate of 80.6%).
Results: Kuwait’s residents prefer the option of reducing the subsidies that they currently receive to that of structuring a tax system. If the government is going to structure a tax system, Kuwait’s residents prefer corporate taxes if small businesses are excluded from the tax base. A significant majority (79.54%) of the participants believe that this would be a good option for the government to increase its revenue. If the government does not pursue the option of corporate taxation, excluding small businesses, residents also favor property and sales taxes, provided that they exclude foodstuff. These represent the top three favorable options for Kuwait’s residents.
Originality/value: The findings could help initiate a new body of literature regarding Kuwaiti taxation and allow for comparisons with other GCC countries. The results could also be valuable to the Kuwaiti government to make sure that the public is on the side of the government and, therefore, preserve social harmony at this new phase of attempting to diversify the Kuwaiti economy.
Research limitations/implications: The sample of the study is not 100% random because not all individuals in Kuwait have the exact same probability to be part of the study. The percentage of Kuwaiti citizens in the sample is dominant (around 97%), which is not representative of the entire population of Kuwait. Another limitation is the fact that the data was collected after Kuwait joined the GCC tax treaty, which could have affected the responses of respondents.

 

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Nov 19, 2019

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